The Property Relationships Act - How Does It Affect You?

While every relationship depends on trust, it’s important to keep the Property (Relationships) Act (PRA) in mind.  Not only could this affect you, but others close to you such as your children.  In this article we will briefly explain how the PRA works and discuss the things that you can do to protect your property from possible claims.


The PRA applies to de facto (including same sex) couples whose relationship has generally lasted at least three years.  This also includes married couples and takes into account the time they lived together immediately prior to marriage.  When a relationship ends, all of the property that the couple owns is classified as either ‘relationship property’ or ‘separate property’. Relationship property includes the family home and chattels, whenever acquired, and all property acquired by either party during the relationship (subject to certain exceptions).  Separate property generally includes property acquired before the relationship began that has been kept separate, and property that has been acquired by succession, survivorship or gift from a third party e.g. an inheritance. Relationship property is divided equally except in extraordinary circumstances. As a general rule, the longer the relationship, the less likely it is that there will be much in the way of separate property.

If you do not like how your property would be classified and divided under the PRA, you can “contract out”. This means that you and your spouse/partner can put in place your own rules as to how you would like your property divided should your relationship end. A contracting out agreement, sometimes known as a “pre-nuptial agreement” can be completed at any time.

A trust is an ideal structure to protect assets acquired before a relationship starts.  Property held by a trust generally falls outside of the PRA regime. When a relationship ends, trust property will continue to be managed by the trustees in accordance with the trust deed. However, there are some provisions in the PRA that enable the court to compensate a spouse/partner where the transfer of relationship property to a trust has had the effect of defeating their rights under the PRA.  If you are already in a relationship and have been for some time, it is unlikely that transferring property to a trust will help. However, if your relationship is in its early stages, there may be some benefit in transferring your property to a trust and/or “contracting out”.

While a trust may not protect your assets from claims arising from your relationship, it may help protect assets for your children.  For example, if your child uses money you have given them to buy a family home that they share with their spouse/partner, it automatically becomes relationship property.  If you are concerned that the money you have given them may end up being shared, you may wish to consider providing for them through a Family Trust.  Similar issues arise with property left to your children under your will.

An Inheritance Trust can help protect your child’s inheritance from potential relationship claims. It also avoids your child having to transfer their inheritance to their own trust for protection; which means they do not have to gift those assets at a rate of $27,000 a year.  If you leave their inheritance in an Inheritance Trust set up for their benefit, the transfer can be completed without the need for gifting.

What should you do next? It is essential that you obtain professional advice in respect to the asset planning measures discussed in this article.  For specialist advice or a complimentary consultation, please contact a Trustees Executors Adviser on 0800 Trustees (0800 878 783) or email enquiries@trustees.co.nz.

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