Q. My husband and I are separating after five years together. We are getting on well so we decided we would both stay in our home until the summer when we will put it on the market. Once it is sold, we will settle our relationship property. I wasn’t going to look for another house just yet, but I have come across the perfect property for me and I would like to make an offer. My parents are going to gift me the money for the deposit, but they are worried that my husband could have a claim on it, given that our divorce hasn’t been finalised. I don’t think he would do that but is it a possibility?
A. When you separate it is necessary to divide your “relationship property”. Generally speaking, your relationship property will be the assets you have accumulated during your relationship including your family home and chattels.
There are some assets and debts which can remain “separate property” and don’t need to be shared. These include money or assets which existed prior to the relationship, that are kept separate from any income earned during the relationship. Also, gifts and inheritance received during the relationship which are kept separate.
The property you acquire once you cease living together as a couple is also separate property. So, the money gifted by your parents for the deposit on your new home would be considered your separate property.
However, be aware that separate property may lose this status if it is “intermingled” with relationship property or is treated in a way that converts it to relationship property; for example, if your husband ended up living in the new property with you for a while and contributing to the property either financially or by helping you with renovations.
The first thing you should do is talk through the situation with your husband, and make sure he agrees that your new home will belong solely to you. If no intermingling occurs, then it should be classed as separate property. However, this wouldn’t stop your husband from bringing a claim against it if he chose to. It is unlikely he would be successful, but you would still incur the time, legal fees and stress to defend the claim.
To feel more secure, you could document it in writing. This can be done in a letter or email to your husband in which you should ask him to confirm this is his understanding. That is, your new home and your parents’ gift remain yours. Having written documentation would provide clarity and add additional weight to your verbal agreement.
I also recommend you and your husband enter into a Separation Agreement. This can be a simple document which records that you and your husband are separated and the date of that separation. It would still be important to make sure you keep the deposit gifted by your parents and the property purchased separate from any of the property you jointly own with your husband.
It might be tempting not to risk upsetting your husband by requesting these formalities, but bear in mind that even if couples are on good terms after a separation, this can change once one of them starts to move on with their life, or there are disagreements over big decisions such as the sale price of the home.
It is good that you and your husband are still getting on well after deciding to separate. On the face of it, your new home would probably be considered your separate property. However, if you want to avoid any uncertainty, I advise you and your husband to sign a separation agreement.
This article was first published in the NZ Herald.