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Queenstown law

What's fair in love and war - short relationships and Trusts


The law in New Zealand treats all forms of contribution to a relationship - financial and non-financial - equally. So the starting point is 50:50.


I just want to touch on two things though - firstly relationships of short duration, and secondly, what happens when they have a Trust.


Firstly, the rules are different if the relationship was short. Less than three years is what the Act presumes is a relationship of short duration, but a longer relationship can also be treated as one of short duration if the court decides. For example, if the partners live apart for a period or if the court considers that the relationship was "limited in terms of quality". It takes an assessment of each case, but the point is that just because it has been more than three years since the show started doesn't necessarily mean everything should be divvied up equally.


Secondly then, what happens when our golden couple have a Trust? This is a pretty common scenario. The issue here is that Trust assets are generally not personal assets which are subject to relationship property law. So if the parties go their separate ways we are relying on them to agree on how the assets of the Trust should be split.


What if they don't agree?


The High Court looked at this recently. In that case a couple formed a Trust early in their relationship and when their relationship ended two years later the Trust had acquired three properties.


To fund the properties, apart from bank funding, the Trust borrowed about $1.2 million from her (and her various entities from before the relationship started), and $260,000 from him. So she had contributed about 80% compared to his 20%. After that though, they both contributed to mortgage payments etc.


By the time they got around to splitting everything up the equity in the Trust properties (after repayment of their initial contributions and bank loans) had grown to $1.5 million and battle recommenced.


He said it should be split 50:50.


She however, argued that he should get paid interest on his initial $260,000 and she should get the rest. Her basis for this was that the relationship had been short, and they had relied to a large degree on her capital contribution which was much greater than his.


The Family Court initially said No, they should share equally on the grounds that there was a big difference between what life would be like for him had the marriage continued compared to what his position would be like without the ability to benefit from the income and capital of the Trust in future.


She appealed to the High Court which overturned the Family Court decision and granted a 60:40 split in her favour. Its reasoning was that his expectations regarding what his life would be like were not objective, plus the Family Court hadn't given enough weight to other factors, particularly the short duration of the marriage and the fact that, without her large initial contribution to the Trust properties, the Trust would not have been able to buy the properties.


I'd venture to say that this fact situation will be familiar to many out there. Having said that, every situation is different. It just shows that it is always a good idea to get legal advice.


If you have any queries regarding property law matters please contact us on phone 03-4500000 or russell@queenstownlaw.co.nz

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