Separating in New Zealand
Understanding Relationship Property Division
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What happens during a separation in New Zealand?
A separation is a significant event and a distressing time. In New Zealand, the process of separating involves understanding how assets and liabilities will be divided, with the presumption of a 50/50 split under the Property (Relationships) Act 1976. Here are the key things you need to consider when dividing your relationship property and the essential steps for preparing for your first meeting with your lawyer.
When dividing relationship property, it is generally governed by the principle of equal sharing. This means that any property acquired during the relationship is typically divided equally between partners.
Presumption of 50/50 Division
The law presumes that relationship property should be divided equally unless there are compelling reasons to deviate from this principle. Factors that may influence the division include the length of the relationship, contributions made by each partner, and any economic disparities that may exist or continue after the relationship ends. For instance, if one partner was a stay-at-home parent for ten years of the relationship and now can only work part-time, this may be used to assist with an economic disparity claim.
Claims for Economic Disparity
Economic disparity claims can arise when one partner has significantly lower income or financial resources compared to the other, potentially due to sacrifices made during the relationship, such as caregiving or homemaking. However, claims for economic disparity cannot be determined until a full review of the assets and liabilities has been completed. Both parties must seek legal advice to see whether they have grounds for an economic disparity claim.
Contracting Out Agreement
Couples may choose to enter into a contracting out agreement (also known as a prenuptial or separation agreement) before or during the relationship. A contracting out agreement cannot be entered into when a couple intends to separate. These agreements allow partners to specify how their property will be divided in the event of separation.
If a valid contracting-out agreement exists, it will take precedence over the default provisions of the Property (Relationships) Act. This means that the agreed-upon terms will govern the division of property, which may differ from the typical 50/50 split.
Family Trusts and Relationship Property
Family trusts can complicate the division of relationship property during separation. When a family trust is involved. Generally, if the trust was established during the relationship and the assets were acquired with relationship property, they may be considered relationship property subject to division. However, a careful review would need to be conducted to identify whether Trust property has become intermingled and forms part of the relationship property pool.
Preparing for your meeting with your Divorce Lawyer
1. Establish a Separation Date
The new Trust Act requires that the Trustees meet at least annually to discuss the Trust's affairs. The Inland Revenue Department also requires that Trusts (including dormant Trusts i.e. that only hold the family home) file an income tax return (form IR6); comply with additional disclosures, and prepare financial statements.
2. Compile a List of Assets and Liabilities
Gather detailed information on all relationship property, including properties, bank accounts, investments, and personal belongings. Similarly, document any debts or liabilities incurred during the relationship. This can be jointly held or in one party’s sole name.
3. Seek Legal Advice
Engaging a lawyer with expertise in family law can provide valuable guidance throughout the separation process. Legal professionals can assist in understanding rights, obligations, and the implications of any existing agreements. A binding separation agreement can only be established once both parties have been independently advised by their lawyers.
4. Consider Mediation
Before resorting to legal proceedings, both parties should first consult their own lawyers and attempt to negotiate directly with one another (only if you have an amicable relationship with you ex-partner). If negotiations fail, you can then return to your lawyer to assist with the negotiation. This approach can be more cost-effective and help both partners reach a mutually agreeable solution.
5. Engage a Mortgage Adviser and Accountant
Both parties need to involve mortgage advisors and accountants (if one party is self-employed or owns a business) early in the process. Mortgage advisors can assess whether refinancing options are available to remove one party from shared debts, while accountants can help evaluate the financial implications of the separation. This can include determining what each party can afford, particularly regarding the family home.
When dividing relationship property in New Zealand, this is usually done on the presumption of a 50/50 split. However, circumstances such as economic disparity claims, contracting out agreements, and family trusts can influence the outcome. By preparing adequately, seeking professional advice, and engaging in open communication, individuals can avoid a prolonged dispute and settle the matter as promptly as possible.
From here, book an initial consultation here with one of our team, who can discuss your options going forward.
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Book an initial consultation with one of our team, who can discuss your options going forward.
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