When separating, knowing the rules on property division can save stress and money. Photo / 123rf
When separating, knowing the rules on property division can save stress and money. Photo / 123rf
Opinion by Jeremy Sutton
Jeremy Sutton is a barrister and family lawyer at Bastion Chambers.
THE FACTS
The division of trust property is complex; legal advice is needed to resolve these issues.
The Property (Relationships) Act 1976 doesn’t apply to trust-owned assets, complicating claims to the family home.
A constructive trust claim may be possible due to contributions, but success is challenging and evidence-dependent.
Q: I was with my husband for 18 years and we have three children. When we started our relationship, my husband’s home was owned by a trust. The trust also owns my husband’s business, which he has worked in throughout our relationship. I also helped with the businessand I also helped him with it. I was never paid but my husband received a salary, and we would get extra money on top of this, which paid for our lifestyle.
Ten years ago, I received an inheritance from my parents. The majority of this, around $165,000, was spent renovating our family home. The rest of the inheritance was put into Bonus Bonds which were cashed out last year and are sitting in our savings account.
We have separated and the children and I have moved in with my parents as my husband said I have no claim to our family home, now worth around $2,000,000.
A: Because the main assets are owned by a trust the division of the trust property is complicated. You will need to seek advice from a lawyer to better understand and resolve these issues.
The main provisions of the Property (Relationships) Act 1976 will not apply to the property owned by the trust as these assets are not relationship property. For example, if your husband owned the family home in his personal name, you would be entitled to an equal share in the asset regardless of whether it was owned prior to the relationship. However, that is not the case where the family home is owned by a trust.
Your claim
Your claims to the trust are generally restricted to section 44 and 44C of the Property (Relationships) Act 1976, section 182 of the Family Proceedings Act 1980, or a constructive trust claim.
Section 44 applies to dispositions to trusts made in order to defeat another party’s interests under the Property (Relationships) Act 1976. Because the family home and the business was owned prior to your relationship, unless there has been other acquisitions of trust property during your relationship, it seems unlikely that section 44 would apply.
Section 44C applies where relationship property has been disposed of to a trust. It is not clear whether any relationship property has been disposed of to your husband’s trust but section 44C could apply if that was the case; for example, if your or your husband’s income was spent on mortgage repayments or renovations.
Nuptial Trusts
It is not clear whether section 182 would apply either. That section applies to nuptial trusts.
Relationship property is normally split equally, but what if it is in a trust? Photo / 123rf
Constructive trust claim
For there to be a constructive trust it must be shown that:
(a) the claimant made contributions, direct or indirect, to the property in question. Contributions need not be money and can be other services, such as work performed to improve or maintain the property. There does however need to be a link between the contributions and either the acquisition, improvement, or preservation of the property.
(b) the claimant had an expectation to share in the property;
(c) the expectation was a reasonable one, and;
(d) the defendant, being the owner(s) of the property, should reasonably expect to yield an interest.
Constructive trust claims are normally very difficult to be successful, one reason being because it relies on documentary evidence from a long time ago.
You have made contributions to the trust property in the form of your work for the business and the $165,000 of your inheritance spent on renovations. The dispute would centre around the expectations.
Inheritance
In practice, your inheritance will usually retain its separate property status, where it is kept separate from relationship property funds and assets.
In the case of your inheritance, which is now in a savings account, so long as the funds in the savings account represents only your original inheritance (ie the inheritance was not intermingled with other funds in the savings account) then those funds will be your separate property.
The situation is not so simple when it comes to the $165,000 spent on renovations on the trust-owned family home.
If the family home was owned in your personal names and was relationship property, then you would have no avenue to claim any compensation for your inheritance spent on the renovations. This is because the inheritance would be considered intermingled with relationship property.
However, as above, the expenditure of inheritance on the trust-owned property could give rise to a constructive trust claim.
Summary
Trust property is a difficult area and many parties seek mediation to resolve these issues.
