Kerikeri, New Zealand

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Thu, 27 October 2016

Different types of contracting out agreements - Inheritance and building a home - Wed, 5 October 2016

This is ‘part two’ of my series on when a contracting out agreement (pre-nup) may be helpful.

This one is pretty simple. This is the classic case of an inheritance divided. Again, the names have been invented.

Jill’s parents have passed away. Her mother was the last to die, and left Jill a modest inheritance ($200,000.00). Jill and her partner Kent purchased a home together with the money. This was to be their home. But prior to purchasing the house Jill and Kent signed a pre-nup. The pre-nup “ring fenced” the $200,000.00 inheritance. The agreement recorded that this $200,000.00 was Jill’s separate property and that this separate property was being used to purchase a family home. The agreement said that if Jill and Kent separated the inheritance would be protected. The agreement said that Jill could either buy Kent out (half the equity, after the mortgage, and after the $200,000.00), or if the house was sold she would get her $200,000.00 back, if there was enough money available after paying the mortgage. Five years later Jill and Kent separate. The house is valued, and has not gone up much. Jill ‘buy’s Kent out’ for a very small amount of money $10,000.00. She does this by borrowing a little more, and taking over the debt. Kent is not very happy, but there is nothing he can do, and the couple go their separate ways.

Jen’s parents have passed away. Her mother was the last to die, and left Jen with a modest inheritance ($200,000.00). Jen and her partner Kenny purchased a home together with the money. This was to be their home. They don’t sign a pre-nup. Five years later Jen and Kenny separate. The house has not gone up much in value, but still has the $200,000.00 equity. Jen has to either find/borrow another $100,000.00 to buy Kenny out, or sell the house. Either way Kenny gets $100,000.00 because that’s the value of the equity. Jen can’t afford to refinance the mortgage that much, and the house is sold. Five years after her mother died she has managed to keep half of the inheritance.


In a small town like Kerikeri when I mention I’m a lawyer it’s situations like this people often mention. People want to know if they can fix the problem. Technically they can, but they need to act fast I say. Often it’s seen as too difficult. Sometimes it's too late. In those cases we can only hope there is not a separation. But usually when one party is asking those questions it means there may well be a separation.

New Zealand law protects inheritances. Usually it will be your separate property. This means when you separate it won’t be able to be shared by your spouse or partner. However if you use the inheritance to purchase a family home or family chattels (furniture, cars etc) the inheritance is not protected – the law is very clear – your separate property rights are overruled. It is only in cases of exceptional circumstances where you can recover a bigger share of the property – usually it’s a 50/50 division.  Realistically if you want more than 50/50 you are going to have to go to Court.

Again – the problem can be avoided very easily by signing the contracting out agreement. As I have said it’s a form of insurance.


If you would like to discuss pre-nups you can contact Law North Lawyers in Kerikeri on or 4077099, or contact me directly: . If you’re a local and want to just chat just pop into our office (above Pagani, next to McDonalds).

Law North Limited – local lawyers looking after Far North people.

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