Do I need a contracting out agreement/prenup as well as a will?
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"I've got a will, so why would I need a prenup as well?" It's a question some people ask when they’re in a relationship and thinking about their estate planning.
While the two documents serve different purposes, together they can help provide greater certainty about what happens to certain assets in the future.
In this series of ‘Ask the experts’ articles, we answer commonly-asked questions about estate planning – wills, enduring powers of attorney and estate administration – to help you and your whānau make informed decisions.
Justine Wood, Specialist Trustee at Public Trust, explains what’s important to know about prenups when it comes to thinking about your will.
A prenup, also called a relationship property agreement or contracting out agreement, is often recommended because relationship property rules can affect how assets are dealt with when you die, even if you have a will in place.
Under the Property (Relationships) Act, relationship property is generally divided between partners when a relationship ends, either through separation or death.
During your relationship, you and your partner can make an agreement rather than share your assets according to the Act. One of the purposes of the agreement is to define which assets are separate property versus shared relationship property. For example, you may wish to agree on how a house that has been in one whānau for years, or a farm or business that one partner owned before the relationship began, should be treated.
Putting in place an agreement can be particularly useful for blended families, where one or both partners may want certain assets to pass to their own children or other beneficiaries.
A relationship property agreement can help determine what assets make up your estate and you can leave to others, while your will sets out who should receive those assets when you die.
Whether an agreement is necessary depends on your personal circumstances. You can have a valid will without one. However, if you and your partner want arrangements that differ from the default rules under the Property (Relationships) Act, an agreement might help provide greater certainty and help reduce the risk of disputes or unexpected outcomes for your loved ones when you die.
It’s important the terms of any relationship property agreement align with the terms of your will. That way, the two documents should work together, rather than their terms conflicting, which may cause unnecessary complexity and cost when it comes time to administer an estate.
It’s important to seek professional legal advice about your specific situation, particularly if you have significant assets, existing property or a blended whānau.