Dividing your property when you split up (“Relationship property”)
Classifying and valuing relationship property
Relationship property and separate property
Property is divided into two categories, relationship property and separate property.
What is “relationship property”?
Relationship property is the property that must be divided between the parties when their relationship ends. Relationship property will usually include:
- family home and chattels (including the family car, household furniture, and anything else owned by the family or used for family purposes). These are all usually considered relationship property regardless of who paid for them or when they were acquired
- family businesses and investments (the general rule is that any business used to produce family income and any savings or investments made out of family income are treated as relationship property)
- property owned jointly or in equal shares by the spouses or partners
- property acquired during the relationship (if the property was acquired before the relationship but it was intended for common use or benefit, it can be considered relationship property)
- contributions to superannuation and insurance policies after the relationship began, including Kiwisaver
- increases in the value of relationship property, or any income from it or any proceeds from selling it.
Note: Taonga and heirlooms are excluded from the definition of “family chattels” and so will usually be separate property rather than relationship property, but this will need to be decided on a case-by-case basis.
What is “separate property”?
Separate property is the property of each spouse or partner that is not relationship property. The general rule is that separate property remains the property of the spouse or partner who owns it and does not have to be divided according to relationship property law.
Separate property includes:
- property acquired by either spouse or partner while they are not living together as a couple
- property acquired out of separate property and any proceeds of sale of separate property
- increases in value of separate property, and income, interest or dividends earned from separate property
- property that a spouse or partner acquires from a third person by gift, inheritance, or because the spouse or partner is a beneficiary under a trust settled by a third person (unless this property gets mixed with relationship property).
Note: Gifts given by one spouse or partner to the other are not relationship property unless the gift is used for the benefit of both spouses or partners.
Can separate property become relationship property?
Separate property may become relationship property if it gets mixed with relationship property or used for family purposes. For example, separate property may become relationship property if it is used to acquire or improve relationship property.
Also, where the value of one spouse’s or partner’s separate property is increased by:
- the direct or indirect actions of the other spouse or partner, or
- the use of relationship property,
- then the increase in the value of the separate property is considered to be relationship property.
Debts are separated into two categories: personal debts and relationship debts.
Personal debts are the responsibility of the person who incurred them (took the loans out).
Relationship debts usually fall into one of the following categories:
- joint debts
- common enterprise (or joint business) debts
- debts taken out to acquire, improve, maintain or repair relationship property
- debts taken out for the benefit of both parties in managing the household
- debts taken out for bringing up children of the relationship.
The value of the relationship property that is available to be divided is the total value of the relationship property minus the relationship debts.
Note: Whether a student loan is a personal debt or a relationship debt will need to be decided on a case-by-case basis.
Valuing relationship property
How is the value of the relationship property worked out?
The general rule is that the property being divided under the Property (Relationships) Act is valued at the date of the court hearing. However, the court does have the discretion to set a different date for valuation if it thinks it is appropriate.
If there is any dispute about the value of property or household items, it is important for the parties to get independent valuations.