Prenup Power: 5 Reasons Why You Need a Contracting Out Agreement

• In New Zealand, a "prenup" is legally known as a Contracting Out Agreement (COA), which allows you to define how property is divided, opting out of the default 50/50 split.
• A COA is crucial for protecting assets you owned before the relationship, as well as future inheritances and gifts, ensuring they remain your separate property.
• These agreements provide security for children from previous relationships by ring-fencing assets intended for them.
• For a COA to be legally binding, it must be in writing, and both partners must receive independent legal advice before signing.
• Thinking about a COA isn't about expecting a relationship to fail; it’s a practical step for financial clarity and mutual respect.

Talking about a "prenup" can feel uncomfortable. It often brings to mind dramatic movie scenes rather than sensible financial planning. But in our experience, reframing the conversation is the key. A Contracting Out Agreement, as it's known in New Zealand, is one of the most powerful tools available to a couple for creating certainty and protecting their future.

It’s not about planning for a breakup. It’s about starting a relationship with honesty and clarity.

New Zealand’s Property (Relationships) Act 1976 governs how assets are divided when a marriage, civil union, or de facto relationship ends. The default position is simple: equal sharing of all relationship property. While that sounds fair, it doesn't always account for individual circumstances. A Contracting Out Agreement (COA) allows you and your partner to set your own rules, creating a plan that truly reflects your unique situation.

Here are five key reasons we advise clients to consider one.

Perhaps you’ve worked hard to buy a house, build up savings, or establish an investment portfolio before your relationship began. It’s a common assumption that what you bring into a relationship remains yours. However, the law is more complex.

Under the Act, after a relationship of three years or more, assets that were once separate can become relaitonship property, making them subject to the 50/50 division rule. We’ve seen this happen when the family home was owned by one partner beforehand, or when separate funds are used for shared benefit.

A COA clearly defines which assets are to remain separate, no matter how long the relationship lasts. This provides absolute peace of mind and removes any ambiguity.

An inheritance or a significant gift from family is usually intended for you alone. While the law generally treats inheritances as separate property, they can easily become mixed with relationship property. For example, if you use inherited money to pay down the mortgage on the family home or deposit it into a joint bank account, it risks being reclassified as a shared asset.

A Contracting Out Agreement can specify that all current and future inheritances or gifts will remain your separate property. This honours your family’s intentions and ensures these assets are protected. It’s a vital component of robust personal asset planning, especially for those with family trusts or complex estates. You can learn more about how this fits into a wider strategy on our page about Trusts and Personal Asset Planning.

When you have children from a previous relationship, you also have a lifelong commitment to their financial security. Many of our clients want to ensure the assets they have built can be passed on to their children.

Without a COA, your property could be subject to division in a way that reduces what you can leave to them. An agreement allows you to ring-fence specific assets—like a property, savings, or investments—and designate them for your children. It’s a responsible and caring way to balance your commitment to a new partner with your obligations to your children.

If you own a business, its value is often one of your most significant assets. During a relationship, the increase in that business's value, or even the entire business itself, can be classified as relationship property. A separation could lead to a claim against your business, potentially forcing a sale or causing major operational disruption.

We've observed that this is a major point of anxiety for entrepreneurs and business owners. A COA can explicitly define your business as separate property. This protects it from being divided and gives you the security to continue growing your business, confident that your hard work is protected.

Ultimately, a Contracting Out Agreement is about communication. The process requires you and your partner to have open and honest conversations about finances, expectations, and the future. Getting these topics on the table early on builds a foundation of trust and mutual understanding.

And if the relationship does end, the benefits are immense. The period after a separation is when the couples go through intense stress and expense. A COA removes the uncertainty. You’ve already made the difficult decisions in a calm and collaborative environment, saving you both emotional turmoil and significant legal costs down the line.

A casual chat or a handwritten note won't hold up. For a Contracting Out Agreement to be valid in New Zealand, you must follow strict legal requirements.

In our practice, we ensure every detail is handled with precision. The agreement must be in writing and signed by both partners. Most importantly, each of you must receive independent legal advice from your own lawyer before you sign. Your lawyer's role is to explain the effects and implications of the agreement and certify that you understand it. This step is non-negotiable, without certification the agreement is not legally binding.

It's also important to know that a court can set aside an agreement if it's deemed to cause a "serious injustice." That’s why we work carefully to draft agreements that are fair, thorough, and designed to stand the test of time.

A Contracting Out Agreement is a mature and proactive step towards building a strong relationship on a foundation of transparency. It allows you to define your own future rather than leaving it to the default provisions of the law.

If you’re considering a COA or want to understand more about relationship property law in NZ , we are here to help. Our team provides confidential, expert guidance to help you protect your assets and gain peace of mind. Contact us to discuss your situation and see how we can assist you with your relationship property needs.

_Disclaimer: The information contained in this article is for general guidance only and is not a substitute for legal advice. You should speak to a qualified professional to discuss your unique circumstances._