What’s Mine is Not Necessarily Yours: Inheritance and Relationship Property

The Property (Relationships) Act 1976 (the Act) applies to all marriages, civil unions and de facto relationships. The Act deals with the division of property upon the end of a relationship whether that be through death or separation. It promotes equal sharing of relationship property unless there is a good reason to deviate away from equal sharing.

When managing a separation, it is important to determine whether your assets are relationship property or separate property.

Assets acquired during the relationship are generally relationship property. The Act does provide however, that inheritance is not relationship property, unless the inherited property or the proceeds are so intermingled with the other relationship property that it is unreasonable or impracticable to regard the inheritance as separate property. Where your inheritance has not been intermingled, it is immune from claims by your spouse or partner. 

Commonly people apply their inheritance to relationship property by paying off their mortgage or putting it towards the purchase of the family home. While it makes sense to do this to assist in relieving the financial pressure within a relationship, the risk is that the inheritance is then caught by the equal sharing rules in the event of separation. 

It is possible to protect your inheritance and keep it as your separate property while still enjoying the financial freedom of a reduced mortgage by entering into an agreement that contracts out of the equal sharing rules under the Act. Such an agreement is commonly referred to as a “pre-nup” or “contracting out” agreement and can be entered into at any point during the relationship. A contracting out agreement confirms the status of both relationship property and separate property.

In the absence of entering a contracting out agreement it is important that you keep your inheritance separate and not apply it towards or intermingle it with relationship property.

At DTI Lawyers we have a team of specialist relationship property lawyers headed by director Hayley Willers. Our team can assist you with your relationship property matters whether that be protecting your assets against future relationship property claims or navigating you through the division of your assets on separation. Contact us on 07 282 0174 or reception@dtilawyers.co.nz.