Your checklist to navigating division of relationship property and the reasons it’s done this way.
Dayna Dustan
After what may (or may not) have been an ongoing debate on whether to separate, you and your partner have decided to pull the trigger. But what comes next? How are things split up?
Step 1: Figure out where you stand
Under the Property (Relationships) Act 1976 (Act), the presumption is that of equal sharing of relationship property where parties are in a “qualifying relationship”. If you aren’t in a qualifying relationship, the presumption is that you get out what you put in.
A “qualifying relationship” is broadly defined as a relationship whereby there is a common intention to share a life together. There are several factors that come into play to determine if you’re in a “qualifying” relationship”. As a general guideline, if you’ve been living together for three or more years OR there are kids involved (including step kids where you are contributing to those children’s care and welfare), it’s likely that you are in a qualifying relationship.
If you think your relationship is “close enough” to a qualifying relationship or if one person has contributed “way more” than the other, a 50/50 division may still apply. Contributions may be both financial and non- financial. If in doubt, give Lewis Lawyers a call and get our advice on the nature of your relationship before working through the rest of this checklist.
Step 2: How is your property split?
What to do with Bank accounts, chattels and everything in between.
Relationship property is all the property (including any debts) that is applied for the use and benefit of the relationship. The presumption is that relationship property is to be shared equally. Relationship property can be everything from your Kiwisaver accrued during the relationship, income (include annual leave and bonuses), Afterpay accounts, shares, and student loans. It also includes household items like the car and television.
Interests you have in any companies and/or trusts can also be relationship property. Trusts can be a bit more complicated depending on when the trust was settled and what the trust fund is composed of. Click here for further information on the relationship between trusts and relationship property.
What about our house?
If you lived together in a house that one or both of you own, this is usually called a “family home” under the Act. Where there is a family home, the presumption is that the value of the home will be equally shared when property is divided (as will the obligation to repay any home loan).
If one person is not an “owner” of the property (that is, they are not recorded on the title), the Act lets that person claim compensation as if they were an owner of the property. Usually, that compensation is 50% of the home’s value as at the date of separation.
Other property- like an investment property- is usually treated in the same way as other relationship property depending on when it was purchased, how it was paid for and how it is owned.
What isn’t divided 50/50?
Heirlooms, inheritances, gifts, and sums from trusts settled by a third party are usually separate property unless they have become “intermingled” into relationship property. Intermingling is where property becomes so mixed with relationship property that it’s impractical to tell that property apart from everything else. For example, when you use an inheritance to pay for a family holiday and top up that trip with money from your other shared accounts.
To prevent intermingling, there should be a reasonably clear path showing the receipt of the funds, where those funds went and what they look like now. Think: money in a separate savings account with no other funds added.
What if I’ve contributed way more than my partner to the relationship?
If your contributions (financial and non- financial) are significantly more than your ex- partner so that it would be seriously unfair (or “repugnant to justice”) for an equal division, you could ask for a different division of property. The threshold to do so is generally high and goes beyond the functions of each person in the relationship.
Think: old mate who’s down at the pub all day every day, gets a bit aggressive with his partner when home, has never worked a day in his/her life and gets a small benefit from WINZ while his partner has been slaving at his/her 9am to 5pm job, putting every penny towards running the household and then still does all the cooking, cleaning, maintenance, and every other job around the house.
This is, however, different to the stay-at-home mum that has looked after six kids while her partner has run the farm for the past 15 years with little help around the house. In this scenario both parties are contributing to the relationship in different ways.
If you have concerns about your contributions to the relationship, it may be worth calling a lawyer to see if you have a claim worth exploring further.
What if I’m in a different financial position to my ex- partner in separating?
The Act also contains claims that apply when you and your ex- partner’s living standards and income are significantly different after separation because of the division of functions during the relationship. In these circumstances, the lesser earning partner may be entitled to compensation after the division of relationship property has taken place to bridge the disparity. Click here for further information on economic disparity.
What is maintenance?
Under the Family Proceedings Act 1980, parties are required to maintain each other- even after the relationship. Maintenance looks at the reasonable expenses of each person and their ability to meet those expenses due to the division of functions between the parties during the relationship. Maintenance looks at both short- term and medium-term needs. Click here for further information on maintenance.
Ok so what do I do with this information? And how do I keep my legal costs down?
It will really assist you and your former partner to keep legal costs down if you can remain civil and agree the matters below as much as possible.
You can work through the division of property by:
1. List down all the relationship property you and your partner have together. This is the “relationship property pool”.
2. Agree on the value of each item of relationship property as at the date you separated.
3. Agree on who is to keep what (keeping in mind that the end value after splitting things up should usually be 50/50).
4. See if any adjustments are due. If one person is keeping the higher value of items, the other person would be entitled to an “adjustment” or “settlement” sum to even things out.
If you have a business, we can recommend experienced accountants to value company shares.
Step 3: See Lewis Lawyers for your separation agreement
You and your ex-partner must each get independent legal advice for a separation and relationship property agreement to be legally binding under the Act. Unless there is a valid agreement in place covering all aspects of your property, your ex- partner can raise a claim against you for compensation related to your relationship for:
· three years after you separate if you were in a de facto relationship; and
· One year from the date your marriage is dissolved if you were married.
Next Steps
If you are separating from your partner or just want to get a better idea of your legal position, please contact our Dispute Resolution and Family Law Team.
Part 2 of this article will discuss childcare arrangements on separation, entering into a new relationship (and a new agreement) and why you should update your will.
