Most of us know the giddiness the preliminary stages of a relationship bring as you excitedly engage in discussions of future plans involving travel, buying your first home together or starting a family.  For Wiremu and Sarah, spring means returning home from a stint overseas and thinking about putting a deposit down on their first home together before they start their family.

Wiremu owns a property that he bought before he met Sarah, and he wants to use the equity from that property towards the deposit. He is excited about taking this next step with Sarah, but in the back of his mind he is worried about what could happen if things don’t go as expected and he and Sarah separate, like their close friends have recently.  
Meanwhile Sarah’s parents have offered to give Sarah $50,000 as a contribution towards the deposit. Sarah’s parents have told her that they do not expect to be repaid, but they would like for Sarah to receive the full $50,000 back from the sale proceeds in the event that the house is sold.
Both Wiremu and Sarah have discussed Wiremu’s other property and their unequal contributions towards the purchase, and both agree that they wouldn’t want to take what the other has contributed. This is a good first step, and while none of us wants to contemplate the worst, having a written agreement (often called a section 21 or Contracting Out Agreement) means that should the worst happen, everyone is on the same page about what the agreement or understanding was. Without one, everything is divided equally in the event of a separation regardless of what was said or agreed at the time.  
Ringfencing is something that can be done to protect specific assets that exist at the time of the agreement or come to exist later if the ringfenced property is sold and a new asset purchased. All other property that you acquire during your relationship can be dealt with as relationship property and shared equally.  
Sarah and Wiremu have agreed they want to protect Wiremu’s property and each other’s contribution in the event that things don’t go to plan. To do this they approach a family lawyer who drafts an initial agreement based on ringfencing the property and their initial contributions and setting out their understanding of what will happen if they separate. However, before they can sign, they each need to be independently advised as to the effect and implications of what they are agreeing to since they are seeking an unequal division of relationship property should it be necessary.  
As Sarah and Wiremu have no intention of separating they have left everything to each other in their wills. However, they know that if for any reason they separate in the future, they have clearly protected their initial contributions.  
If you have any questions or would like advice on any relationship property matters, our Family Team at Schnauer and Co would be happy to assist.

Schnauer & Co,
1 Shea Terrace, Takapuna
09 486 0177
schnauer.com