What can I do if my ex-spouse put relationship property into a trust?

A husband sold part of a farm which was considered relationship property to a discretionary trust during his marriage. When he separated from his wife, his wife was barred from making a claim on her share of equity of the farm because of the transfer to the trust. The only claim the wife had access to was the interest-free debt that the trust owed to her ex-husband.

Under our current legislation, courts are entitled to make an order to deal with situations where relationship property is transferred into a trust and that transfer defeats the claim and rights of the other party.

These orders can include:

•          Requiring one spouse to pay to the other a sum of money out of either relationship property or separate           property; and
•          Requiring the transfer of either relationship property or separate property from one spouse to the other.

The court may also require the trustees of the trust to pay a sum of money calculated from the whole or part of the trust’s income for a period of time, or until a certain amount has been paid. However, this option will not be available if the above money or property transfer provides compensation to the other ex-spouse. Nor will it be available if a third person has in good faith changed the ex-spouse’s position to enable them to distribute trust income or if the order would inherently be unjust.

The court in the above case found that the claim and rights of the ex-wife had been defeated because the value of the farm grew, while her share to the debt remained constant. Therefore, the court ordered the ex-husband to pay the wife compensation of her share of the farm’s equity.

When making an order, the court has a discretion to consider factors such as the value of the property put into the trust, the value of the relationship property to be divided, the date when the property was put into the trust, whether the trust provided something of value in exchange for the property or whether the ex-spouse and any child from the marriage is currently or has been a beneficiary of the trust.

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.
Gianna Menzies