Challenging trust property owned by one partner

What are trusts and how do they apply to relationship property?

Firstly, even if you established the Trust, but your partner contributed to the assets, the Trust will not necessarily be separate property. This is true even if a third party established the Trust.

To clarify, this means that Trusts are not an absolute protection against relationship property. This will be determined using the standard test in relationship property laws.

Certainly a partner will have no interest in a trust unless you are a beneficiary of the trust or the trustees have given you a legal interest in the trust.

In other words, if you and or your partner have a vested or contingent interest in a trust, that interest will be sufficient to qualify as property under relationship property laws.

Relationship property laws make provision for some possible claims by the non-owning partner against these interests. So even if a distribution is classified as being your separate property, this may not necessarily protect you from claims.

If you are unsure whether you or your partner has a legal interest in the trust, talk to a lawyer. Alternatively, contact Agreeable and we may be able to help.

How does the current law deal with trusts?

At the moment, it is clear that simply owning assets in a trust is not an absolute bar from claims. However, if a trust is involved the Family Court has limited jurisdiction, and can refer matters to the High Court. But this can be an expensive and time-consuming process.

The law expressly allows for the trust-owned house to be included in some situations, such as:

  • If the house was transferred to the trust when the couple were in a relationship;
  • Even if the property was already in a family trust before the relationship commenced, if a loan is secured over the property and a partner made repayments;
  • If one party contributed to the “improvement” of the home, then they may have an ability to claim against the trust.

In addition, there may be other situations in which a Trust does not separate your property from relationship property.

What is changing?

In 2019, the Law Commission will suggest reforms to the relationship property laws in New Zealand which have not changed for over 40 years. In terms of trust, this may include allowing the Court to have wider powers with regard to the sharing of trust property.

Therefore, before entering into a relationship, entering into a relationship property agreement recording the manner in which you seek to have your property divided in the event of separation, will be important.

Relationship Property Overseas: How the law applies to you

It is becoming increasingly more common for long distance relationships to be the norm where partners may be based overseas. Consequently, many have assets overseas, and may be curious as to how the law handles the division of relationship property.

To begin, you should familiarise yourself with the Property (Relationships) Act 1976 (“The Act”) governing this area of law Generally, disputes over property situated overseas as long as they’re moveable and partners are domiciled in New Zealand, the New Zealand courts will have jurisdiction over it. The term “domiciled” means that at least one partner must consider New Zealand their home or place of residence.

 

What overseas property is within New Zealand’s jurisdiction?

Overseas assets are defined in s 7 of the Act as classified as either being movable or immovable. The section applies to immovable property that is situated in New Zealand, and movable property situated within New Zealand or elsewhere.

Examples of movable property include:

  • Bank savings
  • Superannuation
  • Proceeds of sale from immovable property
  • Family chattel

Examples of immovable property include:

  • Land
  • Debt
  • Leasehold interest in land

When is property moveable or immovable?

Generally, if it’s an movable property situated overseas, New Zealand has no jurisdiction.

overseas relationship property
Whether property overseas can be relationship property in New Zealand depends on whether it is moveable

Exceptions

Courts may decide under a property relationships proceeding to not enforce equal division of relationship property which is usually the presumption under the Act.

Here are 4 exceptions to the general rule and discretions made to the general rule against moveable and immovable property residing overseas:

  1. Discretion to overseas movables

Various factors influence whether courts will grant an order against someone who is not domiciled in New Zealand in respect to their overseas movables. These factors include but are not limited to:

  • practicality of costs in
    collecting relevant evidence and enforcing the order;
  • reasonableness of expecting a
    foreign respondent to defend themselves in proceedings in New Zealand; and
  • whether they make up a significant portion of relationship property.

  • A claim under private international law

Another exception is an action under private international law. This includes a claim between parties under contracts or equity. Equity was developed to supplement the common law where it is unfair.

  • Family Home

The exception to land can be made if the overseas immovable property was capable of being a family home at the time of the marriage or de facto relationship. In cases like this, courts would usually adjust the shares of one partners interest in the relationship property.

  • Agreement in writing

Parties not domiciled in New Zealand can agree in writing for the Act to apply to their moveable and immoveable property situated in New Zealand or overseas. Hence, the easiest way to ensure that you have control is to get a relationship property agreement.

Figuring out your rights and claims to a parties’ overseas property is tricky when the courts have traditionally determined the nature of your property. But even if a court determines an asset is an immovable overseas property, this might not defeat a claim for compensation.

This article was written by Ashley Yuan.

Separation Agreement: Things to Include to Protect Your Finances

Separation Agreement: Things to Include to Protect Your Finances

Introduction: the Separation Agreement

If you are separating out of a marriage or de-facto relationship, or getting a divorce, you should consider getting a separation agreement.  Other than Court, it is the only valid way of dividing relationship property once a relationship ends.   Some people do this process informally, however, this can result in arguments and Court down the line.

But going to court can be very costly. While the relationship is still on good terms, you might want to negotiate a separation agreement.

You might like to refresh your knowledge of what Relationship Property means before you continue reading this article. Essentially, your separation agreement allows you to dictate how your assets will be divided.  If you get a valid separation agreement, this will override the provisions of the Property (Relationships) Act 1976. But in order for it to be legally binding on both parties, the Separation Agreement must be:

  • In writing;
  • Signed by both parties;
  • Following independent legal advice; and
  • A lawyer has to sign and witnesses your signing. This lawyer also certifies that they explained the effect and implications of the agreement to you.
  • Similarly, your partner will also need an independent lawyer doing the same certification.

What you can expect in our Separation Agreement ‘template’:

Our Agreeable separation agreement includes aspects such as:

  • The relevant dates of the relationship (when you were married or started living together, when you separated);
  • What will happen with the family home and any mortgage on it;
  • What will happen with the chattels, furniture;
  • Any bank accounts and what is to happen with those;
  • Motor vehicles and who gets what;
  • Kiwisaver and superannuation;
  • Debts – who is liable for those;
  • Any adjustments to be made or adjustment payments to make;
  • Administrative clauses, such as the requirement to make complete disclosure and to execute any necessary documents;
  • That each party has taken independent legal advice on the implications and effects of the Agreement;
  • Costs – normally each party pays their own costs and shares the cost of the agreement and certification; and
  • Witnessing by Audio-Visual communication (agreeing that this is effective).

Things to include in your Separation Agreement

If you are married or in a civil union with your partner and you later decide to apply for a divorce, you can also use the separation agreement as evidence that you have been apart for 2 years. It is necessary to show that you’ve lived apart for two years before you can apply for a divorce.

Before you go ahead and purchase Agreeable’s Separation Agreement, here are some key things most couples think about when they get a separation agreement.

 

The Family Home

One of the main assets couples own is the home. You could also have jointly-owned chattels. Think about your family car, household furniture and other ‘big ticket’ items.

Regardless of who paid for the Family Home, it will usually be relationship property.

When you separate, you can sell the main Family Home. The sale will be divided in half and shared between you and your partner. Otherwise, one party may keep the house and buy the other  partner out. This might be desirable if you have children to consider.

In the Family Court, the judge guides their decision by general principles. You might like to think about these principles when dividing your own relationship property:

  • That since each partner has contributed equally to the relationship, the assets will be shared equally too i.e. split in half
  • The Court won’t look at who is ‘at fault’ for breaking up the relationship
  • Unpaid domestic work has equal value to economic work

However, your separation agreement does not have to divide your assets in this way. If you are purchasing a separation agreement and then seeking your partner’s approval, you can show them that you have thought about fair terms.

 

What about Separate Property?

But you and your partner may also have other assets which are not relationship property.

An example is other investment home(s) which are not the Family Home. This could be ‘separate property’ which does not come under the Relationship Property Act if it can be determined to not be relationship property. Separate property remains the property of the partner who owns it.

Situations can get complicated. For example, sometimes both partners own a home capable of becoming the family home. Generally, when relationship property is to be divided, the home of only one partner will be considered the main Family Home.

Separate property can include property one partner got while they were not living together as a couple. Or it can be property that a partner acquires from another such as an inheritance (unless this property gets mixed with relationship property). If you need legal advice on your individual circumstances, Agreeable can help you find Family Law experts.

Child-Care Arrangements

If you have children from your relationship to consider, our Separation Agreement, does allow you to detail what your day to day care and contact of your children will be, access and other major decisions regarding the upbringing of your child or children if they are still minors.

The court will only be concerned only with what is in the best interests of the children when they consider child-care arrangements.

 

Your own or your partner’s debt

You or your partner can be liable for any personal debts (even if they are solely in your partner’s name) if they are considered relationship debts. Relationship debt includes any joint debts or debt that is solely in your partner’s name if:

  • the debt was related to the relationship property. For example you used it to get a loan on a car you both used, or for a business you both benefited from;
  • the debt was for the benefit of both partners. For example rent, debt to buy furniture;
  • the debt is the result of the cost of bringing up any children you have together.

You can deal with how to divide up any joint debts or whether one party takes these debts over and provides an indemnity for that party not taking over the debt.

Think about your current credit card debts, any remaining hire purchases, student loans etc.  Your lawyer will ask for more information if there is not enough details in your separation agreement. We recommend you spend some time listing these out with your partner.

 

What about Kiwisaver?

If you have contributed to Kiwisaver after your relationship started, or another employment scheme such as the Police Superannuation or other government scheme, then you need to share this amount with your partner when you separate.

Generally, this will be split in half. Your certifying lawyer will need to see proof of the value of your Kiwisaver – unless it is only a small amount.

You can withdraw your Kiwisaver on the grounds of significant financial hardship and serious illness. Your Kiwisaver scheme manager will need to be reasonably satisfied that you or your partner is suffering or is likely to suffer significant financial hardship. Then you can make a significant financial hardship withdrawal. Significant financial hardship includes significant financial difficulties which can come up after separation.

 

Finally, is your agreement fair?

If you do have to go to court, it is likely that the judge will determine whether:

  • the agreement is fair;
  • you both worked on the agreement without pressure and entered into it freely;
  • it covers all your assets after full disclosure.

The extent to which a judge will stay with your agreement reflects the level of his acceptance of the above three points.

If one of you is in breach of the deed of separation and the other goes to court to enforce it, the judge can alter the terms of the agreement.

A separation agreement is useful in so many ways. It allows for certainty, it ensures your separate property stays your separate property, and probably most importantly, it helps to give parties closure.  

Buy your Separation Agreement now

People are increasingly turning online to meet their everyday needs. Technology can make this a more satisfying, efficient and easier process. This is exactly the aim of Agreeable, an online dispute resolution platform and service.

Agreeable offers the following ‘DIY’ services and steps so that you can move on:

  1. Purchase our agreement. It will automatically generate your tailor-made agreement.
  2. Contact us to certify your document with our expert Family Lawyers.
  3. Go ahead and put the terms of your agreement into action if needed.

Things such as Family Trusts and businesses can make your situation more complicated.  Please talk to one of us at the Agreeable team about your situation.

If you have a dispute over relationship property, Agreeable can also help you resolve this if both parties are willing to negotiate or arbitrate. Otherwise you can consider what your options are with our Family Law experts. Please contact us on what your next steps may be.

Disclaimer: Any information we provide is general information. Please do not rely on the contents of this article as legal advice. Agreeable is not a law firm or a substitute for a law firm. 

DIY Relationship Property Disputes

“See you in court” might be very satisfying to say after a bitter break-up, however, this strategy may not serve you that well in the long term.

We have written on the key aspects of relationship property disputes before and your options when you have a relationship property dispute. However, we are now offering a service where a couple can quickly and easily settle relationship property issues themselves after a relationship breakdown.

The mechanism is a separation agreement and it is what we recommend for all parties that are still on reasonably good terms with each other.  The other three forms of resolution – mediation, arbitration or the courts all take significantly more time and cost a lot more money.

After purchasing the separation agreement, a previously loaded set of questions obtains all the relevant information from you and inputs it into your agreement – creating it “automatically” and without the need for a lawyer to spend their time drafting it.

However, for a separation agreement to be enforceable, both parties must receive independent legal advice and have the agreement certified by their advising lawyers.  We also offer this certification process via Agreeable.

For an agreement, advice and certification from two lawyers, the cost is normally between $1500 – $1800 + GST (depending on the complexity of your particular agreement).

If it’s possible for you, we think a self-directed separation agreement should be your preferred option given its time, cost and stress savings.  If you have any questions, please don’t hesitate to call one of the team at Agreeable on 0800 263 700.

Disputes over Relationship Property – Your Options

What to do when a relationship property dispute arises

Property division between partners following the end of a relationship can become a complicated and drawn-out process. This is sometimes the case because parties may feel that filing Court proceedings against one another is the only way forward. Indeed, the NZ Family Court is designed to facilitate effective family dispute resolution, however, individuals can avoid the stress, cost and time associated with Court proceedings, by creating an enforceable property division contract of their own. This course of action can be facilitated by lawyers, mediators or arbitrators with special expertise in family law, even if agreement or good will between parties is lacking. This article provides some information on these out of court avenues. Note that the information provided here is intended as a guide only. If more information is required in relation to a personal property dispute, it may be that the team at Agreeable can help by providing more information.

 

The Family Court

The Family Court is empowered under the Property Relationships Act 1976 (the Act) to order division of relationship property in the event of a marriage, civil union or de facto relationship ending. For a brief account of how the Act requires the Courts to categorise, evaluate and divide property between individuals, see “Relationship Property – The Fundamentals”.

Filing an application with the Family Court may be appropriate if urgent steps need to be taken, as the Court can make interim orders that are immediately binding. The Family Court may also provide the most suitable forum if multiple and varying claims need to be dealt with. For instance, a relationship property dispute can be heard in the Family Court alongside a family protection claim or some other matter implicating a third party who may be unwilling to become involved in alternative forms of dispute resolution.

However, these scenarios aside, Court proceedings can be time-consuming and unsettling for all involved. Standard court procedure, as well as file backlogs can result in significant delay for parties. Further, so long as the dispute does not involve a vulnerable person or a minor younger than 18 years, accredited news media representatives are granted full access to proceedings.

Dealing with relationship property disputes through the Family Court can also become very costly, especially if evidence is lacking or a point of law arises which proves complex. Pursuant to the Family Courts Fees Regulations 2009, an upfront $700 filing fee must be paid for any application lodged. If the dispute is heard before a Judge, an additional $906 fee must be paid for every half-day. Legal fees also need to be added to the total cost of proceedings.

Finally, filing an application with the Family Court is sometimes not a viable option if considerable time has passed since the relationship in question ended. For those previously in a marriage or civil union, court proceedings must be filed within 12 months of its dissolution (this is usually taken to be the divorce date). For those previously in a de facto relationship, proceedings must be filed within three years from the point at which the relationship ended.

For the reasons stated above, dealing with a relationship property dispute in Court can be stressful, prolonged and costly. However, these shortfalls of the Court system can be avoided if parties choose to work through their relationship property dispute via alternative dispute resolution services.

 

Alternative dispute resolution services

Disagreements over relationship property are particularly well suited to out of court management. This is because the Act expressly allows for dispute resolution by contract. This means that so long as certain requirements are met (as set out in the article mentioned above), and so long as the contract adopted by the parties does not lead to outcomes that are or become seriously unjust, relationship property contracts are binding and enforceable.

 

Arbitration

Arbitration can provide a speedy and cost-effective way to resolve property disputes. Unbound by court protocol, arbitrators can speed up the dispute resolution process considerably. Further, arbitrator fee structures can be negotiated and fixed at the beginning of the dispute resolution process, and forum and service fees can be avoided or significantly discounted .

Arbitration also affords complete privacy to parties. The number of persons involved in the property dispute and contract formation process can be reduced if desired and the opinion of intimately affected third parties such as children or dependents can be integrated into proceedings flexibly. Further, parties can agree upon an arbitrator of their choice.

Another advantage of this kind of dispute resolution is the ability that the arbitrator has to gather information. Though a Judge in the Family Court can order discovery, request affidavits and make interlocutory orders, she is still bound by standard Court procedure. Alternatively, an arbitrator can arrange a one-off meeting, calling parties, lawyers, accountants and any other relevant parties as witnesses. This power, in practice, often leads to speedy and effective information collection, a crucial requirement for successful dispute resolution and contract formation.

 

Mediation

Mediation can also be an effective way to resolve relationship property disputes. Like arbitration, this avenue can offer parties a streamlined, confidential and cost-effective dispute resolution service. As stated above, simplified processes and agreed upon fee arrangements can result in significant cost reductions, and procedural flexibility can lead to thoughtful and effective outcomes.

Importantly however, the role of a mediator differs from that of an arbitrator. Whereas an arbitrator will hear submissions from both sides before arriving at a considered decision (thereby acting as decision-maker), a mediator facilitates and guides the parties to define issues, produce relevant information and arrive at a consensus. Mediation therefore can prove very effective if goodwill remains between the parties, or, even if not, if there is a will to achieve a timely and confidential settlement that the parties can live with.

 

Lawyers

It may be that a trained mediator or arbitrator is not necessary for two parties to arrive at agreement as to how their relationship property should be divided. In this case, the help of a lawyer on the part of both parties may be all that is required. This avenue may be the simplest and most cost-effective way forward, especially if both parties are largely in agreement as to how they wish to divide their property but need reassurance that their agreement will be enforceable. There are particular requirements that have to be met for such an agreement to be enforceable, including that each party have had independent legal advice before signing the agreement and that the lawyer certifies that he or she explained the effect and implications of the agreement to the party before signing. For more information see “Relationship Property – The Fundamentals”.

Because NZ Lawyers are required to follow certain standards of professional behaviour, any insight a lawyer gains into private family arrangements remains strictly confidential. Such standards also insist that fees charged by lawyers are reasonable and fair.

 

Agreeable

Negotiating an agreement which sets out how relationship property is to be divided between partners following the end of a relationship, with the help of arbitrators, mediators and lawyers is advantageous to the extent that much time, money and stress can be avoided. Indeed, the statutory regime encourages these options. If you are interested in engaging in any of the dispute resolution processes mentioned above, Agreeable’s online platform can be used to bring all parties together to arrive at the appropriate outcome confidentially, expertly and efficiently.

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 9 AGREE.

Relationship Property – The Fundamentals

The Property (Relationships) Act 1976 (“The Act”) applies to partners seeking to divide their relationship property following the end of their marriage, civil union, or de facto relationship. This article provides a brief account of how the Act enables NZ Courts to categorise, value and divide property between individuals who have not been able to come to an agreement of their own.¹ Note that the information provided here is intended as a guide only. If more information is required in relation to a personal property dispute, the team at Agreeable may be able to help by providing more information.

 

What is the Property (Relationships) Act 1976?

The Act is a wide-ranging piece of legislation which sets out how property between partners is to be divided in the event of separation (by death or otherwise). The purpose of the Act is to provide the Family Court with a fair and objective framework to be used for the purpose of dividing relationship property between partners in disagreement. This framework is intended to recognise the equal and sometimes varying contributions made by both partners to the fruits of a past relationship, as well as to provide for the interests of children.

 

Who does the Act apply to?

The Act applies to all married couples, individuals in a civil union and people in a de facto relationship.

 

What is a de facto relationship?

A de facto relationship is a relationship between two individuals who “live together as a couple”. In judging whether a relationship is de facto or not the Court will have regard to:

  • The duration of the relationship;
  • The nature and extent of common residence;
  • Whether or not a sexual relationship exists;
  • The degree of financial dependence between the parties;
  • The kind of ownership, use and acquisition of property;
  • The degree of mutual commitment to a shared life;
  • The care and support of children;
  • The performance of household duties; and
  • The reputation and public aspects of the relationship.

Generally de facto relationships shorter than three years are not covered by the Act. The Court will only make orders concerning short de facto relationships if two specific requirements are met. First, the applicant must have either made:

  • a substantial contribution to the relationship; or
  • there must be a child of the relationship. For instance, a child of one of the partners, or even a child who was “a member of the family of the de facto partners”, at the time the couple ceased to live together.

Secondly, for a Court to make a ruling in relation to a short de facto relationship, the Court must be convinced that failing to do so would result in serious injustice, such that without Court intervention the resulting property arrangement would leave a contributing partner seriously disadvantaged.

Other kinds of de facto relationship not covered by the Act include:

  • Relationships ending before 1 February 2002; and
  • Relationships between people under 18 years.

 

What does the Act apply to?

The Act applies to any property owned by a partner.

“Property”, is broadly defined. Typical examples are the family home and chattels and businesses, but the term can also include, for example, rights or interests in relation to a trust, non-transferable licenses and insurance pay-outs. The value of the property in question is usually measured at the time of the Court hearing.

Also, an “owner” of property is also broadly defined as any person who is the beneficial owner of any property in law.

The Act is specifically worded to protect the rights of creditors. Therefore, any kind of agreement or transaction (involving relationship property) that intends to defeat the rights of a creditor, will be unsuccessful.

The way in which property owned by partners is to be divided (or the question of whether it is divided at all), depends on whether the property is classified by the Act as “relationship” or “separate” property.

 

What is the difference between relationship property and separate property?

The Act draws a distinction between relationship property and separate property. The term “relationship property” will usually include:

  • the family home, and family chattels (for instance family vehicles, furniture or other belongings used for family purposes) whenever acquired;
  • property owned jointly or in common by partners;
  • property acquired during the relationship, or in contemplation of the relationship and intended for common use or benefit (for instance, a wedding ring or engagement gifts);
  • sources of family income (such as family businesses or investments);
  • any increases in the value of relationship property, or any income derived from relationship property, or any proceeds from the sale of relationship property (for instance, the increased revenue of a family business, or income gained from the sale of a family car).

Property that is not relationship property is separate property. Separate property tends to include:

  • property acquired by gift, succession or survivorship (so long as it remains separate and is not mixed with relationship property);
  • property acquired as a beneficiary of a trust settled by a third party;
  • property acquired at a time when partners were not living together (for instance, after separation but before Court proceedings);
  • property acquired “out of” separate property, or the sale of separate property, or any increases in value of separate property (for instance, any income received from the sale of an inherited house).

Whether the property in question is classified by the Court as relationship property or separate property, will affect how the value of the property will (or will not be) divided.

 

How are these different kinds of property dealt with?

If property is classified as relationship property, partners are generally entitled to a half share of the property’s value. This general rule will only be departed from in certain limited circumstances, including if a relationship was of a short duration, or if failing to do so would result in an outcome that is repugnant to justice due to extraordinary circumstances.

On the other hand, if property is classified as separate property, it is not generally required to be shared with the non-owning partner. However, it is important to note that an increase in value of separate property can become relationship property if that increase was attributable to the “application of” relationship property, or the direct or indirect actions of the non-owning partner. For instance, a family business passed down from mother to daughter may be the separate property of the daughter. But if a partner becomes involved with the running of this business and increases its profits, the non-owning partner will have a claim to this increase in value under the Act.

 

Contracting out

The Act is an opt-out system. This means that if a couple have entered into an agreement which regulates the division of relationship property in the event of separation, this agreement is enforceable. In order to contract out of the PRA effectively, the following requirements (except in exceptional circumstances) must be met:

  • The agreement must be in writing and signed by both parties;
  • Each party to the agreement must have independent legal advice before signing the agreement;
  • The signature of each party to the agreement must be witnessed by a lawyer;
  • The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement; and
  • The consequences of the agreement must not be extremely favourable to one party at the expense of the other.

 

For more information on out of court avenues to creating a legally enforceable relationship property agreement, see “Disputes over Relationship Property – Your Options”.

 

¹ For more information on solving relationship property disputes out of court click here.

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 9 AGREE.