When To Review Your Relationship Property Agreement.
Relationship property agreements, otherwise known as Contracting Out Agreements, are an essential legal tool for couples who wish to opt out of the standard provisions under New Zealand’s Property (Relationships) Act 1976. These agreements allow you to create your own framework for how assets will be divided if your relationship ends due to separation or death.
However, it’s important to remember that these agreements are not a “set and forget” solution. Just like any legal document, they need to be reviewed and updated as your circumstances change to ensure they continue to protect your interests.
When to Review a Contracting Out Agreement
There are several key changes in circumstances that may require a review of your contracting out agreement:
1. Changes in Relationship Dynamics
You may be planning on having children together and one of you may need to reduce paid work hours to take on more parenting or household duties.
2. Acquisition of new assets
Ensure major purchases like property are properly accounted for within the agreement.
3. Income shifts
If one party’s financial contribution increases or decreases, the terms may need adjusting to stay fair.
Risks of Not Reviewing Your Agreement
Failing to review and update your contracting out agreement could have serious consequences. Some of the main risks include:
1. Court intervention
The court has the power to decide if Contracting Out Agreements are fair and enforceable. Assets may no longer be protect if changed circumstances mean that the implementation of the agreement would cause a “serious injustice”.
2. Misaligned property expectations
As relationships endure, it’s common for both parties to become more financially and emotionally intertwined. What started as a clear division between personal and shared assets might no longer feel appropriate over time.
3. Inappropriate terms
Your circumstances may change in a way that makes the original agreement less fair or appropriate. Contracting out agreements are typically binding in the event of death, not just separation. Many couples focus on the agreement's relevance if their relationship breaks down, but it’s equally critical to consider how your agreement would apply if one partner passes away.
Each agreement is unique and should reflect your needs and intentions, along with those of your partner. As time goes on, conditions that seemed fair at the outset may no longer be appropriate. That’s why regular reviews are critical to ensure the agreement remains fit for purpose, even when the relationship is not at risk of ending.
If you feel you could use some specialist advice, don’t hesitate to contact the Trusts & Wealth Protection Team.
