Entering into a committed relationship, whether through marriage, civil union, or de facto partnership, often prompts important discussions about financial matters and asset protection. In England/Wales, couples who are intending on getting married commonly turn to prenuptial agreements (prenups), couples who have not yet contemplated marriage but are in a committed relationship may consider a cohabitation agreement. In New Zealand, the equivalent is known as a Contracting Out Agreement (COA). These legal tools serve similar purposes but operate within distinct legal frameworks. In this article I explore the key aspects of each and how they can benefit couples seeking clarity and security in their relationships.
Understanding Prenuptial Agreements (Prenups) in England/Wales
Prenuptial agreements are contractual arrangements entered into by couples before marriage or civil union. A prenup outlines the ownership of assets (money, property, investments) and specifies how these assets will be divided if the relationship ends in divorce or civil partnership dissolution.
The family courts give significant weight to prenuptial agreements when making financial decisions upon relationship breakdown, as long as certain criteria are met. To ensure validity and effectiveness, each party must take independent legal advice and exchange financial disclosure. There must be no suggestion of undue influence or pressure. It is also possible to enter into a post nuptial agreement that must meet the same criteria. Crucially, any nuptial agreement must meet a basic level of needs to ensure that the court will uphold it in the event of a future divorce.
Understanding Cohabitation Agreements in England/Wales
Cohabitants do not have automatic rights like married couples – even if you’ve lived together for a long time and have children. So having a legal document like a cohabitation agreement can be useful, to govern what will happen in relation to any joint assets such as property on separation, and also to set expectations in respect to how you will run your finances during cohabitation. For example, how do you both intend to share bills and mortgage payments, and what impact, if any, will this have on property that might be owned jointly or in one person’s name.
Exploring Contracting Out Agreements (COAs) in New Zealand
In New Zealand, Contracting Out Agreements (COAs) operate under the Property (Relationships) Act 1976 to allow couples (married or de facto) to customise the division of relationship property according to their preferences. Unlike the default 50/50 presumption of property division after three years of partnership, a COA enables couples to outline specific arrangements for asset distribution in case of separation or death.
The purpose of a COA is to tailor property division to the unique circumstances of the relationship, acknowledging that many couples do not fit the traditional model of asset accumulation. For example, if one partner enters the relationship with significant assets or liabilities, a COA can safeguard individual interests.
Although couples have the option of creating an agreement that suits their circumstances, they need to be careful that the agreement they have reached does not depart significantly from the default position of equality. For example, if parties say all the assets are to remain as their separate property going forward and to not consider children or change in circumstances in the future, this could lead to the agreement being set aside.
Key Similarities and Differences
Both prenuptial agreements in England/Wales and Contracting Out Agreements in New Zealand share common objectives of asset protection and clarity in property division. However, they differ in legal status and specific requirements:
Legal Status: Prenuptial agreements carry persuasive weight in family court proceedings. In contrast, Contracting Out Agreements are legally binding in New Zealand if certain legal criteria are met.
Requirements: Prenuptial agreements require independent legal advice for each party and must be signed well in advance of the marriage.
Contracting Out Agreements also necessitate independent legal advice and written certification from lawyers to ensure understanding of the agreement’s implications. In order for a Contracting Out Agreement to be legally binding, it must be:
- Recorded in writing and signed by both parties;
- Each party needs to have obtained independent legal advice;
- Each parties’ lawyer will need to certify that they have given you independent legal advice and have fully explained the effects and implications of the Agreement to you before you signed.
Conclusion
A prenuptial agreement in England/Wales and a Contracting Out Agreement in New Zealand both provide invaluable clarity and peace of mind regarding asset division, especially in complex financial situations or blended family dynamics. Cohabitation agreements also provide for unmarried couples in committed relationships to be protected.
Whether you’re preparing for marriage or navigating a committed relationship, legal agreements like prenuptial agreements, cohabitation agreements and Contracting Out Agreements offer proactive solutions for protecting assets and defining property rights. Rayden Solicitors can advise on pre-nuptial agreements and cohabitation agreements, please contact us to discuss your situation in confidence.
