Seven years into my last relationship, after waiting almost a decade for my ex to get a divorce and reach a settlement, I was asked to sign a contracting out agreement. This coincided with another high-urgency transaction in which I paid more than $1 million to buy a share of a house we were going to live in together.
My money helped finance his divorce. I know — what was I thinking, right?!
I was given about a week to absorb the news, get my ducks in a row and organise my affairs for what was supposed to be the long-awaited commencement of domestic bliss.
Despite my better judgement and a sudden case of stress-induced bronchitis, I did what was required of me within the rushed timeframe demanded, despite warnings from my lawyer.
I guess it should come as no surprise that, almost another seven years later, I was back in front of my lawyer, selling back my share of the house and dissolving the relationship.
Here’s what I learned.
1. Have the money talk early
I have no issue per se with prenups, although I’d say they take the shine off a relationship, whether new or old. These conversations should take place early in any serious relationship, not some time down the track, when your lives have become more intertwined and complicated.
Contracting out agreements protect an individual’s wealth in the event of a relationship breakdown. When there are inequalities in assets and other financial circumstances, it’s understandably a prudent thing to consider.
Close to 50% of relationships end in divorce or separation. Money is often cited as one of the biggest causes of relationship breakdowns. By leaving important money conversations until you’re entrenched in a relationship, you risk making things more complicated and acrimonious.
And before you think I’m a gold digger, I paid cash for my share of the house and kept separate accounts.
2. Understand your rights
Never rush into signing a legal document, let alone one with such major implications.
Because money is such an emotional subject and finances are critical to your overall wellbeing, you need to understand all the angles of what you’re agreeing to, including your rights.
It takes time to absorb the implications of a financial future you can’t yet see. However tough it may be to imagine, you’ll need to think through the possibilities and the what-ifs so you can plan and prepare adequately.
No one should ever feel pressured into signing anything in a hurry, even if it’s portrayed as the deal of the century. It probably won’t be.
3. Relationship property
In New Zealand, the general rule is that after three years of living together in a qualifying relationship, relationship property is usually divided equally, subject to the circumstances and applicable legal exceptions.
Contracting out agreements are typically used to protect wealth or assets that one partner brings into the relationship in greater measure than the other.
If you have different ideas about how your property should be treated, talk about them in advance and plan accordingly, with honesty and respect.
See the Property (Relationships) Act 1976 here.
4. Inheritances are not necessarily relationship property
If one of you inherits money during the course of a relationship, that inheritance is generally treated as separate property under New Zealand law, subject to certain exceptions.
As a precaution, consider keeping inherited funds in a separate account or trust and seek legal advice before mixing them with relationship property.
What’s good for the goose is good for the gander if anyone questions that!
5. KiwiSaver
Yes, KiwiSaver can form part of your relationship property.
Depending on the circumstances, the portion of your KiwiSaver attributable to the relationship may be taken into account when relationship property is divided.
6. Lawyers are expensive
If you can work things out without going to court and battling it out with expensive lawyers, great!
Just don’t try to scrimp and save at your own expense. In other words, don’t skip legal advice just to save money. You’ll probably regret it later, even if the breakup is amicable.
A contracting out agreement might cost around $1,000–$3,000, while legal fees in a highly contentious separation can run into the hundreds of thousands. Costs vary considerably, so get an estimate before proceeding.
7. Keep your dignity
Even the best relationships can turn toxic towards the end.
Those of you old enough to remember The War of the Roses will recall just how nasty things can get — sometimes even worse than Hollywood’s depiction.
Seek wise counsel from people who know you well, have your best interests at heart and know what they’re talking about.
The best relationships are built on solid foundations of honesty, respect and great communication.
If money is weaponised at the start of a relationship as a tool of power, it’s unlikely that dynamic will improve over the years.
That’s not to say a prenuptial agreement has to be a relationship killer. Just go in with your eyes open and your mind fully informed.
