Things to know when considering a contracting out agreement
While a contracting out agreement (commonly known as a prenup) is not the most romantic thing to talk about, they are becoming more and more common for good reason. Contracting out agreements are typically when one person enters a relationship with significantly more property than the other, or where there are specific assets that a party wants to keep separate.
When you create a contracting out agreement, you and your partner choose to enter a private agreement which means you can opt-out of the equal sharing rule that normally applies under the Property (Relationships) Act 1976.
What is a contracting out agreement?
In New Zealand, the Property (Relationships) Act 1976 (“the Act”) requires that all relationship property be divided equally when a de facto relationship, civil union, or marriage ends—unless the parties opt out by creating a Contracting Out Agreement. It is a written agreement that sets out how a couple wishes to divide their property if the relationship ends or one of the parties dies.
Ideally a contracting out agreement should be signed before the Relationship Property Act laws come into effect. Typically, this applies once a couple has been in a de facto relationship, married, or in a civil union (or any combination of these) for three years or longer.
When should you consider advice on an agreement?
- You own significant pre-relationship assets
- You have children from a previous relationship
- You are entering a blended family
- You own a business
- If one of the party has significant debt
- You have inheritance or expected inheritance
- You want to avoid disputes
- You want to customise your arrangements rather than relying on the default provisions of the Property (Relationships) Act.
Is a contracting out agreement right for you?
A contracting out agreement is not just for the rich and famous. It’s an excellent tool for any couple who wants to take control of their financial future. Whether you own a business, have children from a previous relationship, or simply want clarity on how finances will be handled, a contracting-out agreement offers peace of mind.
What is the process?
- Have an open discussion with you partner about the agreement, your financial goals, any existing assets, and how you both feel about sharing property and managing finances. It’s important to approach this discussion with trust and transparency.
- Consult independent lawyers. Both partners must have independent legal advice to ensure the agreement is fair and legally binding. You and your partner should each choose a lawyer to help you understand your rights and obligations.
- Draft an agreement. Your lawyers will help you draft the terms of the agreement.
- Review and Revise. Both partners and their lawyers will review the draft agreement to ensure everything is correct and fair. This is your chance to ask questions, raise any concerns, and make changes if necessary.
- Sign and witness the agreement. Once both partners are happy with the terms, you’ll sign the agreement in the presence of your lawyers. Each lawyer will confirm that their client fully understands the terms and is signing voluntarily.
What should I prepare before meeting with a lawyer to discuss contracting out agreements?
We’ll ask you some quick questions around the history of your relationship and keys dates, if either of you have children and any other information around what each party owns. Having this information already written and prepared can make this first meeting for efficient.
Want to learn more?
To get further advice, contact us to make an appointment with one of our specialists.
