The Rimmer case has changed the rules – for the meantime
Many couples now sign agreements ‘contracting out’ of the Property (Relationships) Act 1976. These contracting out agreements are commonly known as ‘prenups.’
Even though some prenups contain clauses that say couples must review the agreement every five years, or when a significant event happens (such as the birth of a child), they are almost never reviewed.
Early relationship prenups
What usually happens is that at the start of their relationship, a couple decide to buy a house together. They want to protect their respective deposits. They may have children from prior relationships to whom they want to leave their ‘share.’ They buy a house as tenants in common and sign new wills. They also sign a prenup stating:
- Their shares in the house are their respective separate property
- They may give each other a right to occupy their share of the home for, say, two years after their death, and
- They intend leaving their separate property to their respective children.
What typically happens next is that the prenup and the wills are put into the bottom drawer and forgotten about. The couple may get married (which automatically revokes their wills), and/or they sell their first house and buy a new property that better suits their needs.
They often buy the new house as joint tenants as, after a lengthy relationship, they want to ensure their spouse inherits the home and cannot get kicked out by their late spouse’s children. When they die, their property lawyer would give them the standard advice that property that is owned jointly passes automatically by survivorship and does not form part of your estate.
Dying
When one spouse dies, leaving a mix of property in their personal and joint names, what happened next used to look like this:
- Transmitting all jointly owned property (the house, the joint bank account, etc) into the sole name of the survivor
- Identifying any property in the deceased’s sole name, and
- If the deceased had a will, distributing in accordance with that, or If the deceased died without a will (intestate), distributing in accordance with the Administration Act.[1]
What happens now?
This long-standing estate administration process has recently been upended by the Rimmer decision in the Court of Appeal.[2] This decision made two statements that have changed the way lawyers think about prenups:
- It is the prenup (not the will, property law or the intestacy rules) that governs what part of the relationship property forms part of the deceased spouse or partner’s estate,[3] and
- A prenup will always be given effect to (unless successfully challenged) on the death of spouse or partner.[4]
This has now changed the process to:
- Finding out whether there is a prenup, and, if there is
- Dealing with all the property specified in the prenup as set out in the prenup
- If there is property NOT covered by the prenup, the survivor can either:– Apply for division of the relationship property that is not covered, or
– Receive their gifts under the will if there is one, or under the intestacy rules if there is not.
How is this different?
The rules of property law ordinarily decide what falls into an estate following someone’s death. That is, if they own an asset in their sole name (such as an identifiable share in a home, or a bank account in their sole name), that will form part of their estate. However, if they own property jointly with someone else, that will pass automatically to the surviving owner(s).
In saying that ‘the division instead proceeds in accordance with the s 21 agreement,’ Rimmer appears to be suggesting that property owned solely in the name of the deceased could nevertheless be transferred to the survivor if it is defined in the prenup as relationship property (particularly if the prenup specifies how relationship property is to be divided in the event of death).
That is a huge departure from the current rules, which state that, when someone dies, their executors (if they have a will) or administrators (if they die without a will) have a strict duty to distribute their property either in terms of the will or the intestacy rules.
If their spouse or partner disagrees with those rules, they can elect to file an application in the Family Court; whatever the court then decides takes precedence over the will or intestacy rules. Rimmer seems to suggest that the executors/administrators can circumvent the rules!
What next?
Now as a result of Rimmer, the first thing we as lawyers need to do is find out if there is a prenup – even if it is 30 years old!
Instead of just working out what passed by survivorship (with everything else going to the estate), we now must establish how a potentially outdated prenup applies to the property owned by the deceased many years later.
The Court of Appeal decision in Rimmer, may not be the last word, as the Supreme Court has granted leave to appeal, so it may be that the rules change again.
For now, however, make sure if you have a prenup, that both your prenup and your will agree on what should happen to your property when you die.
If you think you have a prenup and you haven’t reviewed it in more than five years, now is the time to do so!
[1] Section 77 of the Administration Act 1969.
[2] Rimmer v Wilton [2025] NZCA 374.
[3] Para [40].
[4] Para [39].
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