Why is a Pre-nup called a Contracting Out Agreement?

A Pre-nup is called a Contracting Out Agreement in New Zealand because it is an agreement between two people in a relationship to contract out of the provisions in the Property (Relationships) Act. If you don’t have a pre-nup, then the Act will apply should you separate. That means equal division of relationship property which includes the family home, whenever it is acquired.

 

The family home is where you and your partner live together. Should your relationship end, your home is equally divided regardless of when it was bought. It doesn’t matter that you bought the house 30 years ago and it’s now mortgage free, if your new partner lives in the property with you, after 3 years, it is now considered relationship property and under the Act, will be divided equally should you separate unless you contract out of the Act with a pre-nup.

 

Relationship property also includes family chattels such as household furniture, household appliances, tools, motor vehicles, caravans, trailers, or boats, that are used for family purposes even if you had these items prior to the relationship. Relationship property can also include your beach bach. It even includes household pets.

 

Relationship property also includes your income and therefore your savings and anything you use your income for such as topping up the mortgage repayments on a rental property, KiwiSaver or other superannuation scheme entitlements. Should your relationship end, anything that your income went towards will be considered relationship property and divided equally.

 

If you don’t want your home, income, savings, motor vehicles, or other property you own to be considered relationship property and divided equally if you separate, then you will want to contract out of the Property (Relationships) Act.