Mary Holm, bestselling author and New Zealand’s most trusted financial expert on how to make your money work in the real world, has written countless Q&A columns. In her latest book, Mary has gathered together 184 of her best letters so readers can build their financial knowledge by eavesdropping on the real financial stories of other New Zealanders.
PROPERTY SPLIT AT THE END OF A RELATIONSHIP
How to do a DIY pre-nup that will hold up in court.
IN 2012, I LEFT A 25-YEAR MARRIAGE AND SINCE HAVE PROVIDED ALL OF THE HANDS-ON CARE FOR THREE TEENAGE CHILDREN AND SIMULTANEOUSLY REBUILT MY CAREER. THROUGH SHEER HARD WORK, GRIT AND SOME GOOD LUCK, I HAVE RETRAINED AND NOW HAVE 15 TIMES THE INCOME I HAD ON SEPARATION. IN THAT TIME, I HAVE ALSO HAD A FIVE-YEAR RELATIONSHIP THAT RECENTLY FINISHED. THAT PERSON WAS ALSO SEPARATED, AND HAD NOT MADE ANY DECISIONS ABOUT BUYING PROPERTY OR ORGANISING KIWISAVER, AND DOWNSIZED THEIR CAREER TO LIVE A ‘BETTER LIFE’. WHILE WE WERE TOGETHER, I DID PROVIDE A NICE HOME. THEY PAID SOME CONTRIBUTION TO EVERYDAY LIVING COSTS ONLY. WE WROTE AN AGREEMENT STATING THAT ANY ASSETS PREVIOUSLY OWNED OR BOUGHT BY ONE OF US WHILE IN THE RELATIONSHIP WOULD NOT BE SHARED, AND ANY GAIN IN ASSET VALUE STAYS WITH THE OWNER.
A RECENT LETTER TO YOUR COLUMN IMPLIES SOMEHOW THAT JUST BECAUSE WE LIVE TOGETHER THE PARTNER COULD EXPECT TO ‘PUSH FOR A NAME ON THE HOUSE’ OR SOME OTHER ‘RELATIONSHIP PROPERTY’. ON WHAT LEVEL IS ANY EXPECTATION, LEGAL OR OTHERWISE, THAT A PARTNER CAN ACCESS ANY OF MY FINANCES OR ASSETS?
I put your question to trust and estates lawyer Rhonda Powell. She starts with the basic law. ‘The first point to establish is whether the relationship “qualifies” for the equal sharing regime under the Property (Relationships) Act 1976,’ she says. ‘As a general rule, de facto relationships qualify for equal sharing after three years. Marriages qualify immediately.
‘As a general rule, pre-relationship assets remain your separate property, as do gifts and inheritances, and these
are not subject to division. Assets acquired during the relationship are relationship property to be split equally when the relationship ends.
‘As an exception to this, the family home is always relationship property, if either party to the relationship owns it. Family chattels (household items for family use) are also always relationship property.’
She adds that if your ex moved in with you, and lived there for five years, he probably has a right to 50% of the value of that home.
But what about the agreement you two had – which presumably stated that the family home would remain your separate property?
‘A contracting out agreement is a formal legal document that can only be completed after both parties have independent legal advice, and the lawyers certify the agreement too,’ says Powell. ‘So, if that is the sort of agreement you wrote, you are probably okay. If you wrote one yourselves at home, then it will have no legal effect.’ She adds, ‘Most general practitioner lawyers can prepare a contracting out agreement, but you can also do it yourself online, as long as you still get independent legal advice before signing it.’ Go to agreeable.co.nz.
Family trusts have their purposes, but they can make life much more complicated.
WOMEN MAY END UP WITH LITTLE
I KNOW OF A WOMAN WHO, IN HER SECOND MARRIAGE, HAS MARRIED A MAN WHO HAD PREVIOUSLY PUT EVERYTHING INTO A FAMILY TRUST FOR HIS NOW ADULT CHILDREN. SO THE FAMILY HOME AND EVERYTHING IS IN THERE, AND THE WOMAN DOES NOT (ON PAPER) GET ANYTHING.
AND ANOTHER WOMAN WHO IS THE SECOND PARTNER (BUT NOT MARRIED) OF A MAN WHO HAS MANY ASSETS IN A TRUST, AND EVEN AFTER 15 YEARS SHE CAN’T TALK ABOUT IT WITH HIM. IF THE MEN DIE WHAT IS THE WOMEN’S POSITION RE MONEY? BOTH WOMEN ARE UNABLE/UNWILLING TO ROCK THE BOAT BY PUSHING FOR (FOR EXAMPLE) THEIR NAME ON THE HOUSE. WHAT TO DO?
Two disturbing situations, which I sent to trust and estates lawyerRhondaPowellforcomment.‘Myfirstreactionisthat these women need to consider why they are in a relationship with a person who is attempting to undermine their relationship property rights?’ says Powell. ‘Unfortunately, situations in which (normally) men create structures to deny their (normally female) partners a share of family property are all too common,’ she says.
The men you’re referring to may protest that they set up the trusts before they knew the women. But still, they are in the relationships now, and the women are vulnerable. ‘Trust property is not relationship property to be divided upon separation, and neither can it be passed by will. So, these women would only be able to share in property outside the trust,’ says Powell. She adds that, ‘At the time of a separation, it is sometimes possible to make inroads into property held in a trust through the Family Court, but only with significant stress and expense.’
Her advice: ‘Don’t wait until after the person with the trust dies to sort it out. You need to discuss relationship property up front during the relationship. After they die, it will all be much harder.’
I also asked Powell for any advice for others getting into a relationship in which the other person has put assets into a trust. ‘People can be reluctant to talk about money and let it get in the way of a romance,’ she says. ‘However, the risks of not doing it are too high. If you can’t have that conversation, or if the proposal on the table is unfair to you, then you shouldn’t be in the relationship. If your partner is not sharing when things are going well, how do you think he will behave if it doesn’t work out?’
Sadly, I suspect people’s unwillingness to discuss this issue with their partners is quite common – whether they are in a new relationship or well down the track. If that applies to any readers, can I suggest you point out this Q&A to your partner? It might make your Saturday morning stressful, but the rest of your life less so. Please do it.
Extracted from A Richer You: How To Make The Most Of Your Money by Mary Holm (HarperCollins NZ).
Available now.