Under the Property (Relationships) Act 1976 (PRA), everything a couple owns is sorted into two baskets when they separate or when one partner dies: relationship property and separate property. Knowing which basket an asset falls into can prevent costly arguments later.
Relationship property
Most things acquired during a marriage, civil union or qualifying de-facto relationship (usually three years or more) are presumed to belong to both partners equally. Typical examples include:
- the family home and its furniture
- earnings, savings and investments made while together
- KiwiSaver or superannuation contributions earned during the relationship
- vehicles, boats and household appliances
- goods or improvements bought with relationship money.
Separate property
Separate property normally stays with the person who owns it. It covers:
- assets a partner already owned before the relationship, unless they later become the family home
- inheritances or personal gifts received during the relationship
- compensation for personal injuries
- genuinely personal items, such as heirloom jewellery not used by both partners.
When trouble appears
Problems arise when separate property becomes mixed with relationship property, or when people assume a windfall “must be mine”. A clear example is the case of Rabson v Gallagher. Mr Rabson won a significant Lotto prize during his relationship with Ms Gallagher and deposited the winnings into his personal account, later transferring the funds to a Trust and using them to buy property.
He argued the money was the property of the Trust, but the Court disagreed. Evidence showed the couple regularly bought Lotto tickets together, sometimes jointly, sometimes separately, but always as part of their shared routine. Even though Mr Rabson bought the winning ticket himself, the Court held it was purchased on behalf of both parties and was jointly owned from the outset. The prize money was therefore declared to be relationship property and subject to equal division.
Other common flash-points include:
- using an inheritance to pay down the family mortgage (the inheritance effectively becomes relationship property), and
- a house owned before the relationship that later becomes the family home.
Conclusion and protecting what is yours
The PRA lets partners sign a Contracting-Out Agreement (often called a “pre-nup”). Done correctly, it records which assets will stay separate and how everything else will be shared if you split up or one of you dies. To be valid, the agreement must be in writing, each partner must have independent legal advice, and both signatures must be witnessed by the advising lawyers.
Plain records also help. Keep bank statements showing an inheritance was banked separately, or note who paid for a big purchase. Most of all, take advice early, ideally when a relationship becomes serious, or straight after a windfall.
Understanding the line between separate and relationship property, and planning for it, can prevent surprises and safeguard the assets you care about most.
