Repeal of equal property division on divorce confirmed: how will homes be divided in future?

Talking about money can hurt a relationship!

 

Many couples feel too awkward to have their property arrangements formally notarised when they marry!

 

But if you avoid talking about money, you may find that divorce costs more than getting married!

 

However, if you live in New Zealand, you will soon no longer have to agonise over this issue.

 

New Zealand has confirmed that it will repeal the law requiring property from a marriage to be divided equally on divorce!

 

The New Zealand Law Commission says the law is outdated and needs reform.

 

The commission recently released its final review report on the Property (Relationships) Act, making 140 recommendations to Parliament. The most prominent is to abolish the requirement to divide family property equally after divorce or the separation of de facto partners.

Commission deputy president Helen McQueen said New Zealand had undergone significant social change since the relationship property legislation was passed 43 years ago. ‘The law must keep pace with social change and reflect New Zealanders’ reasonable expectations.’

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However, the report also recommends that some couples be required to share their incomes for a period after separation, for up to 5 years after divorce. This is because a mother or father may have given up work to care for children full-time at home. This would be welcome news for single parents with many children who must juggle work and childcare.

 

Justice Minister Andrew Little said on 23 July that he had presented the report and that the government would now give further consideration to its 140 recommendations.

 

 Andrew Little

 

New Zealand law must keep up with the times

 

Law Commission deputy president and lead commissioner Helen McQueen said the existing laws on dividing property after divorce were ‘no longer fit for New Zealand in century 21’.

 

‘We believe some of the law’s underlying concepts remain appropriate, such as the general rule of equal property sharing for marriages, civil unions and de facto relationships lasting 3 years or more than 3 years. But… matters such as dividing the home equally require major reform.’

 

 

Divorce lawyer Jeremy Sutton noted that people now live longer while marriages last for shorter periods. Many people have more than one significant partner in their lifetime and often settle down later in life.

 

‘The days when two people started a family early and then built their wealth together are gone. Now, people become entangled financially and emotionally with different partners.’

 

A major Law Commission recommendation is to introduce Family Income Sharing Arrangements, or FISAs, which would allow partners to share income for a period after divorce or separation.

 

Family lawyer Jacinda Rennie supported the proposal, saying it would give people faster access to financial support.

 

Under current law, parents may have to wait months or longer for a court hearing, during which financial disputes can arise. ‘Mothers with children are hit hardest when a relationship breaks down. They cannot immediately return to work and have no income.’

 

If the home is not split equally, how will it be divided?

 

The biggest change in the Law Commission’s reform recommendations concerns how homes are divided.

 

Under current law, the family home is treated as relationship property and must be divided equally, regardless of when or how it was acquired.

 

The Law Commission recommends that, if the family home was owned by one partner before the relationship began, was gifted by a third party or was inherited, only the increase in its value during the relationship should be shared equally after marriage, rather than its total value.

 

Property held in trusts

 

Some Chinese families buy a marital home for their children and place it in a family trust to prevent it being divided if the children divorce. In fact, European families often do the same, so properties held in trusts are very common in New Zealand. The Law Commission has also made specific recommendations for reform in this area.

 

The commission recommends giving the Family Court greater powers to divide property held in trusts and simplifying the criteria for when property must be divided after divorce, to avoid delays or added costs when dealing with couples’ relationship property.

 

University of Auckland law professor Mark Henaghan welcomed this. ‘Our country has more trusts than any other country in the world, and most other countries recognise property held in trusts as relationship property.

 

But in New Zealand, you cannot access that money. Even when a trust holds a great deal of money, some people receive very little after divorce.’