K3 Insights

Contracting-Out Agreements and Death: Why Relationship Property and Estate Planning Can No Longer Be Treated Separately

A shift in how estates are determined

The Property (Relationships) Act 1976 (PRA) is designed to achieve a just division of relationship property when a relationship ends, whether by separation or death.

Where one partner dies, Part 8 of the PRA governs how relationship property is dealt with as between the surviving spouse or partner and the deceased’s estate.  The surviving spouse or partner must make an election under s 61:

• Option  A: apply for a division of relationship property under the PRA; or
• Option B: take any entitlement available to them under the deceased’s will or, if there is no will, under the intestacy rules.

This election framework reflects an assumption that the statutory relationship property division and estate distribution operate as alternatives, not cumulative entitlements.

Where there is no contracting-out agreement (or it is challenged or incomplete), the PRA division regime applies and Option A is the mechanism for division.  Where there is a valid contracting-out agreement that governs division on death, the agreement rather than the PRA determines how relationship property is divided.

The reality after Rimmer v Wilton

Contracting-out agreements under section 21 were originally intended to allow couples to depart from the statutory presumption of equal sharing.  They allowed parties to agree on property status, ownership, and division (including on death) particularly where one or both partners brought unequal assets into a relationship.

Over time, these agreements have become far more common and increasingly sophisticated.  This is especially true in second relationships, blended families and situations involving family trusts or significant pre-relationship wealth.

In Rimmer v Wilton [2025] NZCA 374, the Court of Appeal confirmed a critical point, that a surviving partner who relies on a valid section 21 agreement is not applying for a relationship property division under the PRA at all.  As a result, the section 61 framework is generally not engaged and Option A is irrelevant unless the agreement is being challenged or does not fully deal with the property.  

The key point from Rimmer

The practical effect is that a section 21 agreement can determine what property forms part of the deceased’s estate, after which the will or intestacy rules apply to whatever remains.

In appropriate cases, a surviving partner may therefore rely on the agreement to divide relationship property and still receive an entitlement from the estate because reliance on a contracting out agreement is not an application under the PRA for the purposes of section 61.

Why this matters in practice

Many people enter into contracting-out agreements believing the agreement has “dealt with everything.”  In reality, while section 21 agreements can determine how relationship property is divided, it does not automatically align with testamentary intentions unless that alignment is deliberate.

The Rimmer decision highlights this risk.  If a contracting-out agreement does not clearly address how property is to be divided on death, it may leave more property in the surviving partner’s hands before the estate is determined.  The surviving partner may then still inherit under the will or intestacy, producing outcomes that differ from what the deceased expected.  

A similar issue arose in Farquharson v Farquharson [2020] NZFC 1103.  In that case, the parties had separated many years before the deceased died and had already divided their relationship property during their lifetime.  However, they had never legally divorced.

The deceased had not updated his will, which continued to leave his estate to his spouse.  Because the marriage had not been formally dissolved by court order, section 19 of the Wills Act 2007 did not apply.  That section automatically cancels gifts to a former spouse or civil union partner only where the relationship has been dissolved by court order before death.

As a result, the surviving spouse was entitled to inherit under the will, despite the long separation and prior relationship property division.  

This is the same practical risk exposed by Rimmer.  Documents created at different stages of life can interact in unexpected ways if they are not reviewed together.  The key risk is not the misuse of section 61 election, but that a contracting-out agreement that does not clearly address division on death may unintentionally determine the size of the estate before any will or intestacy provisions take effect.

Opinion: contracting-out agreements now do more than people realise

Rimmer highlights that contracting out agreements are no longer merely relationship documents.  Where they address division on death, they also determine what property forms part of the deceased’s estate and therefore influence how that estate is distributed.

In our view, this has important implications:

• contracting out agreements should be drafted with death in mind, not just separation;
• after-death intentions should be clearly addressed within the agreement itself; and
• wills must be reviewed and aligned to reflect those intentions.

Contracting-out agreements remain a valuable planning tool but they cannot operate in isolation.

Practical takeaway

Section 21 agreements operate first, wills operate second.  

If they are not drafted and reviewed together, the outcome can surprise everyone.

The significance of the Rimmer case is not that contracting-out agreements should be avoided but that  effective estate planning now requires coordination between:

• relationship property agreements;
• wills; and
• asset ownership structures.

With careful drafting and regular review, people can avoid unintended outcomes and ensure their intentions are properly carried through both during life and on death.