The Ex-Files: Jeremy Sutton on the challenges of blending your finances with a new partner

A Contracting Out Agreement is vital to older couples wanting to protect their assets and children's inheritance. Photo / 123rf

OPINION

Q: I have recently met a new partner, Stuart, online after separating from my ex-husband three years ago. Stuart and I both have adult children who have all “fled the nest.”

Stuart has recently retired after selling his business – a construction company. I understand he did well from the sale but I don’t know the sale figure.

I have approximately $800,000 from my relationship property settlement from my marriage. I do not have any other assets other than five pieces of art that I inherited from my mother.

Stuart wants to purchase a lifestyle block on the outskirts of Auckland and has suggested we do this together. The properties we have viewed so far are all around the $4 million mark.

I work at an insurance company in central Auckland. Although I was planning to retire in about five years’ time, I would likely resign immediately if we move to the outskirts of Auckland as the commute would be difficult.

How do I protect my relationship property and my adult children?

A: The relationship property legislation was not drafted with later-life “subsequent relationships” in mind. Once you have been in a de facto relationship for three years, the usual “equal sharing” provisions apply if you separate.

Being in a financially stronger position, you can expect that Stuart will probably want to have a Contracting Out Agreement prepared. It is wise to consider possible events as well as separation, but also in the event of either of you dying.

Purchase of lifestyle block

This property would be the “family home” and therefore relationship property (to be shared equally) under the legislation. However given the differences in the amounts you are proposing to contribute, something along the lines of a one-quarter / three-quarter split might be fairer for you and Stuart.

You should also consider:

1. Whether any increases in the value of the property should be split in the same proportions, or if not in what proportions;

2. How the outgoings on the property will be met, both during your relationship and in the event of your separation (particularly given your lack of income and other assets);

3. What should happen to the property if you separate: whether it should be listed for sale, the mechanisms for one party buying the other out, and/or whether either party should be able to occupy it for a period of time before the sale.

Artwork inherited from your mother

The artwork has the potential to become “family chattels” and therefore relationship property, notwithstanding that it was inherited. This is particularly so if you choose to hang the pieces on the walls of the lifestyle block. The Contracting Out Agreement should confirm that they are to remain your separate property.

Spousal maintenance considerations

If you and Stuart separate all your funds will be tied up in the lifestyle block and you will have no income from employment. You would still be able to make a claim for spousal maintenance – as you can’t “opt-out” of the spousal maintenance legislation. You could consider negotiating a provision that requires Stuart to provide you with some immediate financial support if you separate.

Financial disclosure

You don’t know the exact details of the sale of Stuart’s business. You should have a clear picture of Stuart’s financial position before you sign any Contracting Out Agreement, and ideally, before negotiations take place. I suggest that you request that he confirm the details of his assets, debts and income sources (if any) in writing through his solicitor.

Death

It would be prudent for the Contracting Out Agreement to record arrangements in the event of either party’s death. If you fail to do so, you run the risk of disputes between the survivor and the deceased’s family. The arrangements should be fair for you and Stuart but also both of your children. You and Stuart should consider:

1. What provision should be made to the survivor to enable them to have a comfortable existence?

2. Should the survivor be permitted to continue to occupy the lifestyle block (or other family home purchased in substitution) and if so for how long? If the survivor has a right to occupy, are there funds available to the deceased party’s children if a need for funds arose?

3. How the outgoings on the property are to be met.

You should ensure your wills are up to date and align with the terms of the Contracting Out Agreement. You and Stuart might decide to share the details of what you have agreed with your children so that there are no “surprises” when either passes away.

Conclusion

It is important to remember that there are no “right and wrong” answers to these questions – it is a matter of negotiating an arrangement that you and Stuart consider fair, with the guidance of your respective solicitors.