Purchasing shares in New Zealand has become increasingly common in the last few years as a result of easier market access through mobile apps such as Sharesies.

However, in the event of a separation and division of relationship property, it is important to understand if, and when, shares may be relationship property. More information on what constitutes separate property and relationship property can be found here.

When are shares relationship property?

If the shares were purchased prior to the relationship, or were purchased with inheritance or funds distributed from a trust, then they will generally be considered separate property and therefore are not divisible in the event of a separation.

There are some exceptions to this rule, for example:

  • if a share portfolio existed when the relationship commenced, and either partner increased the value of this investment during the relationship using relationship income, the increase in the value of the shares that occurred as a result of that additional cash investment can become relationship property;
  • if the shares were purchased prior to the relationship and the proceeds from the shares (sales or dividends) were applied to the relationship, all proceeds will be considered relationship property and divided equally.

Due to the volatility of shares, the value of the investment is generally divided as at a time agreed by the parties, or should the matter be brought before the court, as at the time of hearing (which may result in the value of the shares changing dramatically from the time that the separation occurred).

Equal division of shares

There are limited circumstances where there will not be an equal division of relationship property shares. This was demonstrated in a Family Court case.

A husband acquired shares in a company 5 years into the marriage. The value of the shares when bought was about $500,000. The couple later separated, after 21 years of marriage.

The wife made a claim for a portion of the shares’ value on the basis that the shares should be classified as relationship property, not separate property. The husband argued that the shares were his separate property. The dispute was eventually heard by the Court.

The Family Court initially decided that the shares were separate property, and that the wife would not be entitled to an equal share because the shares in the company were acquired solely through the efforts of the husband. The Court found that because the wife had no input as to the shares being acquired, all the revenue received from the shares was the individual property of the husband.

However, on Appeal, the Court held that all property acquired after the commencement of the relationship was relationship property, meaning that the entire share portfolio owned by the husband was to be divided between the parties.

The wife was awarded 40% of the $500,000 share portfolio as a result. The reason that the wife received less than 50% was that the Court recognised the husband’s extraordinary skill in his field of business allowing him to accumulate the shares.

The Court weighed up the wife’s contribution to the marriage against the contribution of the husband, and determined that the husband had contributed more due to his significant financial contributions.

This decision is becoming increasingly relevant as investing in shares is more popular than ever, with over 1.5 million New Zealanders participating in the stock market.

With the rise of independent trading companies that offer “individual” memberships, understanding the difference between separate and relationship property is critical, and in the event of separation may significantly impact the total value of relationship property being divided.

If there are uncertainties about whether your shares are relationship property, it is wise to speak with a professional experienced in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.