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Since 1976 with marriages, and since 2002 with de facto relationships, Parliament has tried to give effect to the philosophy that these relationships are a partnership. Both parties contribute in different ways. All contributions in the end should be treated as being of equal value. When a relationship ends, the wealth acquired through that relationship should be shared equally.
Lawyers access judgments where Courts rule on property disputes that have arisen at the end of a relationship. These judgments show that often when a relationship ends, and significant wealth is held or controlled by just one of the parties, one side or the other will go to great lengths either to try and achieve a division of wealth that gives effect to that philosophy or to circumvent it. This can happen when a relationship ends with separation. It can also happen when a relationship ends with death. The dispute may then be between those who inherit from the person who has died and the spouse or partner who has survived.
Over recent years many of the most hard fought cases occur in situations where family wealth is not owned by the parties personally but by a family trust. It is common in New Zealand for major assets like a family farm, shares in companies owning investment properties or businesses, or other investments to be held by family trusts under the control of just one of the parties, often the husband. In such cases equal sharing of the wealth in that trust is not automatic but there are ways it can be achieved. There are also ways it can be resisted.
So there have been cases in which one party will claim property has been put into a trust to deliberately defeat entitlements under the Property (Relationships) Act. Claims can be made even when that may not have been the intention but assets have been put into trust so as to have that effect. There is certain legislation which allows the Court to dismantle trusts when a marriage has been dissolved. Claims may be made against trust assets when someone has worked on property or played their part in a long term relationship with the expectation and belief the couple would be benefiting equally from the wealth held by a trust.
There can also be significant wealth in the earning ability of one of the parties on separation. The highly paid company executive, medical specialist, accountant or other professional, may be part of a business, partnership or practice which assures them of a high income in future years. Is such an earning ability to be treated as an asset for division or should the future earnings be regarded as simply the reward which that person will get from his personal work and efforts after separation?
Judges have held there can be value in a husband's interest in a partnership which carries with it the right to share in significant profits even where the partnership agreement says no partner can sell his or her right to participate in those profits and where on retirement from the partnership that partner may receive nothing. There may be a capital value in a doctor's practice because of the way District Health Boards provide bulk funding for enrolled patients. Because of potential tax advantages, accountants have often encouraged professionals to set up companies so that some of their earnings can be paid to them as a salary from a company while other profits are retained within those companies. In doing so capital assets, e.g. shares, may be created and become an item of relationship property which on separation has to be shared equally.
Working out strict legal entitlements in these situations is not straightforward. When there is conflict over just what is the wealth to be shared, the financial stakes and costs of conflict can be high. When the potential for such conflict arises, constructive, well informed advice from the outset can make all the difference to both the ultimate outcome and the costs that might be incurred in getting there.
There are also situations where one or both parties to a relationship have never believed that the wealth associated with their relationship should be shared equally. It may be because a major part of the capital, say a farm, has been inherited. It may be because each has come to the relationship with substantial assets already and they want to keep those assets for separate families. There may be situations where people want to be in a relationship where they are upfront in saying that what he earns and owns will be his, what she owns and earns will be hers without any sharing. It may be that someone will want to ensure wealth is in a trust so that it will not have to be halved or diminished because of a major breakup. There may be situations where one party to a relationship honestly believes they have such extraordinary ability, energy and ambition that they should be able to keep for themselves the financial rewards that come from all these attributes and that providing support in running a home and caring for children leaving them free to build up wealth should not be treated as being of equal value. There are legitimate steps which can be taken to give effect to these different aspirations. Parliament recognised that people should have the freedom to make their own arrangements. The completion of a pre nuptial or contracting out agreement is a step which can be taken to implement expectations which do not fit with the ideals behind the Property (Relationships) Act.
The cases show that arrangements or agreements made to implement a different philosophy are more likely to stand the tests of time and challenge when they have been designed by lawyers who have a real knowledge of the different ways in which the law may require wealth to be shared when a relationship ends, whether it be because of separation or when one party dies. For those wanting to avoid equal sharing of family wealth, the investment in good advice right at the outset will be worthwhile. That advice will also be the more valuable when through knowledge and experience there can also be observations as to how such arrangements may impact on other longer term aspirations for a relationship. The issues are not straightforward.