Many clients wonder why they have to provide disclosure of their assets and liabilities when they are signing a separation agreement or contracting out agreement. This article explains why disclosure is so important and what could happen if this crucial step is overlooked.
There are two types of agreements which are referred to in the Property (Relationships) Act 1976 (“the Act”). A section 21 agreement (contracting out or “pre-nuptial” agreement) allows a couple to contract out of the provisions of the Act during their relationship. A section 21A agreement (separation agreement) records the division of assets when a couple separates.
Whether you are entering into a contracting out agreement or a separation agreement, the process of disclosure is essential. Disclosure means providing evidence of all assets and liabilities to the other party and their lawyer. Full and frank disclosure allows each party’s lawyer to assess what his or her client is entitled to by law and then to compare this with what the client would receive if they signed the agreement.
Disclosure is essential because:
- Without full and proper disclosure, you may unwittingly agree to accept less than what you are entitled to; and
- If you do not provide full and complete disclosure the agreement is at risk of being overturned in the future. This could have significant consequences for both you and your lawyer. For example, in the case of Graham v Graham the Court set aside a separation agreement because Mrs Graham’s lawyer failed to obtain valuation evidence of the assets.
The type of information you will need to provide as part of the disclosure process will vary, depending on the assets that you own. Your lawyer will be able to advise you what you will need to provide. However, some common examples are:
- Land: Registered valuation.
- Publicly listed shares: Shareholder certificate and a valuation
- Kiwisaver/superannuation: Statement from your provider showing the value at the commencement (and, in the case of a separation agreement, at the end) of the relationship.
- Bank accounts: Bank statements
- Vehicles: Letter of valuation from a car dealership or statement of insurance showing the agreed value.
- Shares in private company: Copy of the annual financial reports
- Trusts: Copy of the trust deed and amendment documentation and a copy of the annual financial report.
Properly completing the disclosure process will help ensure that your agreement is fair, robust and will stand the test of time.
Published: 25 September 2020