Family trusts are a common way of protecting a family’s assets from claims from third parties against the family members individually. 

The way a family trust holds property can however lead to complicated situations if a couple divorces, as the assets contained in it are owned by the Trust and not by the couple themselves. 

There are, however, laws in place that can assist with resolving these kinds of issues. One law which may apply relates to “nuptial settlements”.

What is a Nuptial Settlement?

Put simply, a nuptial settlement is an agreement made in a marriage that makes continuing provisions for either, or both, of the parties to the marriage in respect of their role in the marriage. The essential element required for a nuptial settlement is that there is an obvious connection between the marriage or civil union, and the settlement itself.

An example of this is a family trust created in contemplation of, or during, a marriage or civil union that holds the assets of the relationship for a couple and to which both parties to the marriage or civil union are beneficiaries.

How do I know if I’m eligible to make a claim under this law?

To make a claim to challenge a nuptial settlement, there are four requirements that must be met:

• There must have been a marriage or civil union;
• The Court must have made an order to dissolve the marriage or civil union;
• The dissolution order must have been made within a reasonable time frame (this is fact-specific, with reasonable time depending on each set of circumstances); and
• There must have been a nuptial settlement in place.

What does the Court look at in a claim under this law?

The Court will first determine whether a nuptial settlement is in place. It will look at the settlement and decide whether its proximity to the marriage or civil union is sufficient to regard it as a nuptial settlement. 

The Court will then look at the positions of the parties during the marriage, and compare that with the position of each party post-separation.

The Court will seek to make an order that minimises the negative impact to one party and has the discretion to implement a resolution as it sees fit.

The Court most commonly orders a lump sum payment to the negatively affected party but can make alternative orders if it sees fit. This can include a change of trustees of a Trust or a splitting off the Trust into two separate Trusts (called a resettlement).

How can I protect myself from a claim?

The best way of ensuring that your assets are protected from a nuptial settlement claim is by putting in place a relationship property agreement.

This agreement is made after a couple decides to separate and will set out how the relationship property is dealt with.

If a family trust is dealt with explicitly and fairly in one of these agreements, an ex-partner will be unable to make a claim under nuptial settlement law.

If there is confusion around how a nuptial agreement can be dealt with after separation it pays to seek advice from a professional with experience 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.

 

Please note that Rainey Collins is not contracted to provide Legal Aid, other than in the Treaty of Waitangi area.  We therefore are unable to take on any Civil or Family Legal Aid work. If you require Legal Aid in those areas, you can search the list of Legal Aid lawyers on the Ministry of Justice website.