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Relationship Property - some common questions

23 October 2018

Esther Perel, an eminent writer and psychotherapist who has achieved huge popularity from her last two books and TED talks about relationships, had a few interesting observations to make when she went on a recent trip to Cuba. Cuba has one of the highest divorce rates in Latin America with 70% of marriages expected to end in divorce. It is a society where no one accrues wealth or owns property or things, so it’s much easier to separate – as there is no division of belongings and generally people don’t stay together because of the lifestyle or economic support that the relationship brings. In Cuba, marital relationships emphasise emotional fulfillment and minimal economic reliance. “If one is not met emotionally, why be married?” said one of the local female psychologists.

In contrast to that is New Zealand. When de facto relationships or marriages end, its brings about the potentially challenging task of dividing the relationship property.

In most cases the money or assets you have brought into the relationship and accumulated during the relationship could be split 50/50.

Here are some questions that typically arise when advising clients on their relationship property settlements.

Is my kiwi saver balance relationship property?

Yes. All kiwi saver money becomes part of the relation property pool of money and assets which is divided up when a relationship ends.

The money you have saved over the course of your relationship, including what your employer and the government has contributed, could be divided and your ex- partner could get half.

However any kiwi saver you had before your relationship started will be safe and deemed separate property.

For most people their kiwi saver funds will likely be a significant asset they have built up over time so if halved upon separation it will have a big impact on retirement.

The most common scenario we see is that each person retains their kiwi saver balance and any difference in respective balances will be dealt with through assets retained or forgone or a cash payment known as an ‘adjustment payment’.

As an example: Bridget and Hugh decide to split up after 30 years of marriage. Hugh has a Kiwi Saver balance of $200,000 and Julie has a balance of $100,000. Both of these balances were accumulated during their marriage. All their money and assets upon separation go into a pool. They split everything including the proceeds from the sale of the family home. They each retain a car of the same value but Hugh makes a payment to Bridgetof $50,000 as an adjustment payment for the fact he has a $200,000 balance and Bridget only $100,000.00.

Another option is where the court directs the Kiwi Saver fund to release some of the money so it can be paid out to the partner.

Can I get the engagement ring back if we split before the wedding?

Eleanor had been in relationship with Jared for four years and Jared saved his money and proposed to her with a $10,0000 ring.

Unfortunately Jared had a case of the pre-wedding jitters, cancelled the wedding and ended the relationship two months before the big day.

Once Eleanor got over the initial shock, they were able to agree on the division of relationship property except for the ring. Jared wanted to either get the ring back or get half its value given to him - $5000.

However the general rule of thumb is once you gift something to your partner that is for their use only it becomes separate property.

Eleanor was able to keep the ring, (or sell it and keep all the proceeds). It was deemed a gift and she did not have to pay anything to Jared for the ring.

So it is important to note a gift of jewellery will be the separate property of the person who receives the gift.

Contracting Out Agreements

The only exception to the above scenarios is if you have a pre-nuptial contracting out agreement which specifies the division of property, so that both parties know where they stand.

If you are unsure about your particular circumstances or need advice on how to keep property separate and the possible need for a contracting out agreement, or relationship property advice post-separation, please don’t hesitate to contact us.