Are you in a De-Facto Relationship?
IT MIGHT BE TIME TO GET PROTECTED.
Reaching the three-year milestone in a relationship is usually a cause for celebration, but it can also have important legal consequences. Under New Zealand relationship property law, couples who have lived together in a de facto relationship for three years or more will generally be treated in the same way as married or civil union couples if they separate.
This can mean that assets such as the family home, savings, investments, vehicles and businesses may be divided equally, even where one partner contributed significantly more. Understanding when a de facto relationship begins, and putting the right protections in place early, can help both partners avoid uncertainty and costly disputes later.
How do I know if I’m in a de-facto relationship?
Under the Property (Relationships) Act 1976, relationships can be considered de facto if you are both over 18, living together, and satisfy a number of factors. It is generally considered that once you have reached the three-year milestone, you are considered to be a qualifying relationship and obtain the same rights as a marriage or civil union when dividing relationship property. The Court may also take into consideration:
- The length of the relationship
- Any children involved
- Public perception of the relationship
- The degree of dependence between both partners
- Shared finances
Not all the factors have to apply to be considered a qualifying relationship, which means all relationship property could become vulnerable to equal division if not protected by a trust or opting out of the agreement.
If you have been in a relationship for less than three years, it is considered to be of short duration and the relationship property is generally divided by individual contribution.
What happens if we separate?
Under the Property (Relationship) Act, partners in a qualifying relationship may be entitled to half the assets gained during the relationship (relationship property), regardless of their financial contribution to those assets. Relationship property can include property, vehicles, savings and businesses.
Assets gained prior to the relationship are usually considered to be separate property, but they could still be under dispute if a partner argues they have contributed financially or non-financially throughout the relationship. For example, a partner may have been able to continue growing their ‘separate’ business because their partner had invested time into bringing up the children (including nonbiological) and taking care of the household duties.
How do I stay protected?
For many couples, the equal separation of relationship property may seem like the fair outcome. Others may face a significant loss if they contributed substantially more to the monetary assets. Assets may be protected in a trust, but if the partner had been contributing to the asset held in the trust, it may no longer be considered separate property.
Protect yourself by ‘opting out’ of the Act
Partners can enter their own legal agreement which will decide how their property is divided upon separation. Commonly known as contracting out agreements, prenuptial agreements (prenups), or Section 21 agreements, these documents serve the same purpose: to set clear terms for how relationship property will be managed.
Discussing the terms of the agreement when the relationship is still amicable will be far more beneficial for both parties who will be looking out for each other’s best interests. Opting out can be a difficult conversation, but it will protect both parties upon separation. A contract can be drawn up at any stage of the relationship, but it is advisable to implement it early. The agreement can and should be updated with any significant changes such as the addition of children.
Opting out of the Property (Relationships) Act is a legal process which requires the advice and presence of your lawyer. Contact Halliwells Lawyers for friendly, confidential advice to protect your assets.