Protecting Your Assets: Why Legal Advice Matters for ‘Pre-Nup’ Agreements
Written by Alex Fanning
A recent decision in the Napier High Court, WL v AJ  NZHC 703, is a timely reminder that seeking independent legal advice is crucial for a pre-nuptial agreement (pre-nup) to be valid and enforceable. The decision also demonstrates the consequences of not getting the right advice.
Understanding the Case
Let’s take a look at the case involving Mr W and Ms A.
They began their relationship in 2000, and on 3 July 2001, Mr W bought a home using his personal savings and registered it in his sole name. Mr W and Ms A moved into the home. However, due to issues in their relationship, Mr W wanted to protect his interest in the home. Mr W sought initial advice from a lawyer who explained that under the Property
(Relationships) Act 1976 (PRA), the home could be considered the “family home” since it was Mr W and Ms A’s main residence. If their relationship lasted for three years or more, Ms A could claim a half share of the equity in the home, despite the home being in Mr W’s name and Ms A not contributing financially to it. Mr W was told that the only way to prevent Ms A’s claim was to sign a pre-nup stating that the home was Mr W’s separate property. However, Mr W didn’t seek further legal advice or ask his lawyer to prepare a pre-nup. Instead, Mr W’s sister, who was studying as a legal secretary, drafted up a pre-nup.
Ms A briefly consulted the Community Law Centre over a phone call about the pre-nup. Eventually, both Mr W and Ms A signed the pre-nup with their family members as witnesses. In 2017, Mr W and Ms A separated. Mr W argued that the pre-nup was valid and enforceable, protecting the home as his separate property. On the other hand, Ms A claimed that the pre-nup was invalid and that she was entitled to a half share of all relationship property, including the home.
Justice Mallon presided over the case. Justice Mallon pointed out that Ms A only received brief legal advice regarding the pre-nup over the phone. Justice Mallon believed that if Ms A had received detailed legal advice about the pre-nup’s effects and implications, she might not have signed it. Justice Mallon also noted that Mr W hadn’t received any legal advice on the pre-nup since it was prepared by his sister after he stopped consulting his lawyer. Moreover, the pre-nup was witnessed by family members instead of each party’s lawyer, as required by the PRA. Justice Mallon referred to a leading case on the necessity of independent legal advice and concluded that the advice received was insufficient, rendering the entire pre-nup invalid. Consequently, the PRA applied, and since Mr W and Ms A’s relationship had exceeded three years, Ms A was entitled to a half share of all relationship property, including the home.
Do You Need a Pre-Nup?
For a pre-nup to be valid, it must be in writing, signed by both parties and their lawyers, and each party must receive comprehensive legal advice. Without a properly executed pre-nup, your partner could disregard earlier understandings or verbal agreements about property and insist on their strict legal rights, just like in the WL v AJ case. This could leave you with much less property than you anticipated in the event of a separation. Even if you don’t separate from your partner, it’s essential to remember that the PRA can still apply upon your death. By having a pre-nup, you can specify how your property will be handled in the event of separation or death, providing certainty, and achieving your desired estate planning outcomes.
It’s not too late to get something drafted; you can execute one at any stage before separation. Protect your assets by reaching out to Alex at Bramwell Bate Lawyers for assistance with pre-nup agreements or other relationship property issues.