There is one thing that comes to mind when I hear the word prenup: sensible, but awkward. It would be the sensible thing to do, but so would not buying brunch every weekend. So why?
Well at some point in the next 3 years I am going to stumble into a de-facto relationship without even knowing it. At which point, as far as the Relationship Property Act is concerned, I am married to the lucky person. Imagine if after 3 years of eating at your favourite café you got an equal share in its business. I mean, you contribute to the business by buying eggs Benedict there every weekend, so maybe you should own some of it. But is this necessarily fair?
How does the law work?
This is the somewhat peculiar logic applied by the Relationship Property Act, which currently governs how relationship property is dealt with (which becomes pretty important when people split). Under the Act, property should generally be divided equally between partners based on the family use approach. This means that if you were lucky enough to buy a house while single (apparently it is possible), then found yourself in a relationship and sharing the house for 3 years, your partner would effectively own half the house. This logic applies to all property (except taonga and heirlooms).
However, the Act also gives couples the ability to “opt out”, meaning they can agree for themselves how their assets will be owned and divided if they split up. Such agreements must be in writing and are commonly referred to as “prenups” (in American soap operas) or (here in New Zealand) relationship property agreements or “RPAs”.
The Law Commission recently conducted a review of the Relationship Property Act and outlined 8 ways the family use approach can end in unfair outcomes. Without delving too far into them, they typically highlight the unfairness related to an equal division of property when one person has contributed more.
In the course of the review, the Law Commission made several recommendations for how our law could be changed to better address issues around relationship property. Fortunately for all of us, one of the recommendations made was that there should be an entirely new Act. Unfortunately for us, the slow-moving wheels of democracy will most likely delay that for the immediate future.
How do relationship property agreements fit in?
One of the Law Commission’s recommendations was that the ability to opt-out of the Act should be retained and improved. This serves as reassurance that prenups will continue to be effective, despite the uncertain future of the current Act. Furthermore, the introduction of a section dedicated to the use of audio-visual technology will ideally be included. We think the future of CODR’s RPAs is secure.
Despite this, as with any new Act, the ramifications may remain opaque until tested in court. It has become apparent that the best way to ensure the best outcome for both your partner and you is to simply get an RPA. At the sacrifice of an awkward conversation, it allows you to feel secure and retain control of your assets. Better to decide yourselves what happens to your property, than leave it to an old Act that is well past its use by date, or a new Act that will likely have its own growing pains.
With the above in my mind, instead of asking yourself why get an RPA, maybe you should be asking, why let someone else decide what happens to my assets?
Important things to remember:
- RPAs can be set aside either fully or partially by the court if they are found to cause serious injustice.
- RPAs are void unless both partners receive independent legal advice on their effects and implications and are subsequently certified by separate lawyers (the court can give them effect in some circumstances).
- Getting an RPA is considerably more cost effective than a trip to the Family Court.
- It is rare that you get the opportunity to simply opt-out of law.
- De-facto relationships are on the rise in New Zealand (Stats NZ).
- You need to make sure you’re aware of when you become de-facto and what that means.
- You can get an RPA at any point in the course of a relationship.
 The Act has complex definitions of relationship property and separate property, so this description is deliberately broad and general.