Why you need a Contracting Out Agreement (“pre-nup”)

Stuff you need to know about relationship property law in NZ 

Taking the ‘next step’ in your relationship can be both an exciting and daunting time, whether it’s moving in together, popping the question, or having a baby (not necessarily in that order). If you’ve watched enough American TV shows and movies, you’ll have heard all about “prenups”. You’ll probably have your own preconceptions about what they do, which probably includes thinking they’re not cool because it feels like preparing for the relationship to fail. And having formed that view you’ve probably shelved the idea, and got on with more important stuff like choosing the new sofa and buying the booze for the housewarming party.  

But here’s the thing. The only thing worse than having a pre-nup, is not having a pre-nup. Here’s why, as well as some answers to some common questions around contracting out agreements. 

After you’ve been together 3 years (sooner if you have a kid) ALL your stuff has to be shared if you split up. True Fact. 

If there are just the 2 of you, it has to be shared 50/50. If you have a child, then up to 3 years it has to be divided in accordance with each partner’s contributions, then 50/50 after that.  

That’s the law. The only way around it is to get a pre-nup. You heard it here first. 

I trust my partner, why would I want to make an agreement that suggests otherwise? 

OK, we get it. It doesn’t seem very romantic. But trust us – it’s even less romantic, and also really messy, if you split up without a pre-nup, which means all your stuff is up for grabs. 

And yes, everything between you is peachy right now but that might not always be the case (it if was, lawyers like us wouldn’t have a job….), and there’s nothing that twists the knife quite as painfully as the ex who decides to seek payback for that office party fling you had, by claiming half your car and half your boat for themselves. 

But I don’t have anything flash that’s worth protecting 

When we say “all your stuff” we literally mean ALL your stuff. Your bank account. Your KiwiSaver. Your house. Your car. Your business. Your toys...   

Yeah. Thought so. 

We’ll just see how it goes and get a pre-nup if things start to cut up rough 

This is sort of the relationship property equivalent of asking for the jab when you already have Covid. Too late now my friend. See you in Court.  

Although you can enter into a Contracting Out Agreement at any stage, it’s usually a good idea to have “the talk” early on in your relationship to ensure you’re both on the same page. Typically, people are more inclined to agree to sign an agreement when they have not yet become entitled to the other person’s property.  

Common reasons for getting a pre-nup before you get the KS bed/sofa/Labradoodle are: 

• You want to keep your income separate so that you can go on spending it how you want. 
• You have an inheritance which you want to protect as your separate property.  
• Either you or your partner have come into the relationship with significantly more assets than the other, eg: your Kiwisaver is way bigger than hers 
• You have an interest in a Family Trust and want to protect that. 
• You’re coming from a previous relationship and have kids from that relationship, and so you want to protect property from that relationship for the benefit of your children.  

OK, I might have been a bit hasty when I said pre-nups are for sissies…. but what do we put in our agreement? 

In short, anything you want. It’s your agreement, and only you and your Beloved know what’s most important to you.  

The aim of a pre-nup is for the 2 of you to agree on the status of property, and how it will be divided up if loves young dream turns into a mare. You can specify – 

• What property is always going to be separate property 
• What is always going to be relationship (joint) property 
• How you’re going to divide up relationship property if you separate 

Can a contracting-out agreement be disputed later ? 

An agreement drafted by a lawyer and properly signed and witnessed after independent legal advice is usually pretty watertight. The Agreement written up and signed by the 2 of you on the back of last month’s power bill after a few wines, not so much. There are legal requirements for what makes a legally enforceable contracting-out agreement, and those rules include both of you getting independent advice from separate lawyers.  

A Court can overturn a lawyer-drafted agreement in a limited range of circumstances, such as if the agreement is really one-sided, if there has been a serious change of circumstances since it was signed, or if there was pressure or duress at the time of drafting, such as Darren forcing Karen to sign it on the eve of their wedding while she still wasn’t so sure but, like, really wanted the wedding presents and the honeymoon so….. 

I can’t afford a pre-nup 

Seriously, if you have anything worth anything, then you can’t afford NOT to have a pre-nup! If your agreement is simple, the cost will be modest – less than $1000 – and normally you and your Beloved will pay half each. If it’s more complicated, then it’ll cost more. But remember, if it’s more complicated that’s probably because you have more to lose if you don’t have a pre-nup, so…

The last word… 

Like we said before, we get that it might seem unromantic to suggest a pre-nup when things are going well. But actually, this is exactly the right time to do it – when you’re both looking forward optimistically and love and goodwill is oozing forth from your every pore. And if for some reason the process of entering into the agreement identifies that there is not, in fact, a meeting of minds (e.g.: s/he turns put to be a gold-digger after all…) then best you find that out now, rather than 3 ½ years down the track. 

At McMillan&Co we’ve done pre-nups of all shapes and sizes. We’ve helped clients who just want to protect their breeding pair of budgies, right through to those with a chateau on The Riviera and a trust fund to match. We can help you protect your property, so that you can get on with your relationship with the confidence that comes from knowing that if things don’t work out then at least you won’t lose your other half AND half your stuff. 

Give us a call – (03) 477 2238, or flick us an email – info@mcmillanco.nz 

Charlie Hantler, Senior Solicitor

charlie@mcmillanco.nz