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Relationship Property, s 44, Trustees, Trusts

Anathema to a trust

Transferring assets that might otherwise comprise relationship property to a trust, might appear an attractive alternative to “I love you” but not enough to share my stuff with you. However, even if the relationship is not yet a qualifying relationship for the purposes of the Property (Relationships) Act 1976 (the Act); dispositions to trust can be dispositions that defeat a partner or spouse’s rights under the Act. The relevant legislation and the correct interpretation is set out in K v R as follows:

Equally important to consider, is the quality of the trust in question. In K v R, it might be fair to say that the trust was somewhat less than the sum of its parts. In particular the failure to effect the transfer of property to the trust (notwithstanding a sale note and declaration of trust) brought to bear the question as to whether there was certainty as to the property of the trust. In addition, where the settlor can, as was the case in K v R, as set out at [157] take:

The view of the court was that there were “significant reservations as to whether the Trust is in fact a valid trust rather than a nullity,” such that the trust property remained vested in the “settlor”.

The take away message is that hard conversations are best front footed rather than hard landings when assets are surreptitiously transferred to a trust, or there is an appearance that this is the case.

References:

  • K v R [2020] NZHC 923
  • R v K [2021] NZCA 1999

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