Married, de facto or casual dating: When to have the prenup discussion

Married, de facto or casual dating: Broaching the financial discussion
Is there a right time to discuss a prenup? Photo credit: Getty.

People usually get together for love, not money but for many, the decision is not purely an emotional one.

Most people aren't strangers to the fact that, as Madonna said in 1984, it's a material world and sharing money can be risky. 

How long can couples date before heading into 'at risk territory', where if they become an ex, they can take half? 

Sharon Chandra, family law specialist at Turner Hopkins said that the time to put pen to paper on a prenup varies from couple-to-couple, but a common trigger is when couples move in together.

"Casual daters who aren't serious are unlikely to need [a prenup].

"Children, engagement and financial interdependence are signs of a committed relationship in the eyes of the law," Chandra said.

Jo Batts, a relationship counsellor based in Auckland said that while every couple and relationship is different, milestones such as moving in together or getting married can signal the right time to discuss a prenup.

"Although no-one starts a relationship with the intention of failing, at the beginning, it's useful to have clarity on whether both are committing for a fair-weather or an all-weather journey together," Batts said.

Although bringing up the prenup discussion can feel awkward, it forms part of the plan to protect relationships.

"For couples who arrive in the relationship on a significantly different financial footing, it makes sense to pragmatically acknowledge that, especially given that protecting one's assets [can] involve more than just the couple themselves," Batts said.

The three-year rule

From a legal perspective, the deadline after which a partner or spouse can claim half of the assets is three years' of living in the same residence in a 'de facto' or married relationship. 

As an agreement takes time to draw up and for each to seek independent advice, a month may not be enough time to get everything in order.

"At three years, couples should have [the prenup] all signed up and done," Chandra said. 

A grey area could be in situations where flatmates start dating.   

"The start date [of the relationship] is when the couple officially starts dating," Chandra confirmed, for example, sharing a room and/or rent payments.  

What if my only asset is a car? 

While there's no set level of assets or income that dictates having an agreement drawn up, a good test is whether people own anything that they think is worth protecting.

"A $50,000 car to one person might mean the world, but to a millionaire, it might not mean anything, Chandra said.

Young people who don't own anything but have wealthy parents may still decide that a prenup is the right way to go.

"KiwiSaver, [potential for] an inheritance, being the beneficiary of a trust, and/or a high income are all reasons to consider getting an agreement in-place," Chandra added.

What if assets are equal?

People coming into a relationship with a similar levels of assets may feel comfortable putting a prenup on hold.  

This is a personal decision, however Chandra said that things can change over time.

"If assets are equal, from a legal perspective, the partners are still advised to have one.

"[A prenup] confirms both expectations are the same and if things change over time, e.g. income levels, inheritance or one partner is a beneficiary of a trust, it saves a difficult conversation later."

Should married spouses get a prenup?

People marry for better or worse and sharing money and assets is part of that. Is it really necessary to contemplate 'what if' while basking in post-honeymoon glow?

Chandra said that the three-year rule applies whether people are married or not. At the risk of being a stickler for getting it right, marriage shouldn't affect the decision to have an agreement in-place.

"Marriage is taken from when the couple started living together," Chandra confirmed.

Statistics NZ data indicates that in 2018, 20,949 people married and 7,455 divorced.  The current marriage rate for people aged 16 plus is 10.8 per 1000 people, while 7.7 per 1000 marriages end in divorce.

Although both marriage and divorce rates are currently trending downwards, the Property Relationships Act applies irrespective of whether people are married or in de facto relationships.

How often should the agreement be updated?

As with most agreements, including insurance, to remain robust, a prenup should be reviewed regularly.

"Prenups are not a document that people [should] sign and file away in the back drawer, Chandra said.

"Changes such as a baby, buying or selling a house, business or setting up a trust are all reasons to review things."

Counselling instead of a prenup?

While nothing is guaranteed, couples who plan to stay together or hope to avoid the upheaval of divorce could choose counselling as a way to invest in their relationship. 

Batts said that as separation and divorce can affect living arrangements, family, friends, finances and parenting, all of these things changing at once can create stress, overwhelm and vulnerability - and a prenup won't stop that.

"Plan to take care of your relationship - that's the best piece of financial advice I can give," Batts said.

Broaching the 'P' word may be awkward, but from a legal perspective, it's the only sure-fire way for people in a committed relationship to protect what they own, now and in the future.

While most people believe in fairness, a prenup provides that added layer of certainty and the decision to put one in-place can be a healthy, respectful one.

The three-year rule provides a form of deadline, however the right time to bring up the 'P' word is at the discretion of the individual couple.