Discover when an individual’s powers under a family trust may be classified as “relationship property” in New Zealand. Learn from a recent court case and how to protect your trust assets during separation.

When Can Powers Under a Family Trust Be Treated as Relationship Property?

At Core Legal, we regularly advise clients in Masterton, Wellington, and across New Zealand on complex relationship property matters—particularly when trusts are involved. One increasingly common question we receive is:

“Can my control or powers under a family trust be considered relationship property during a separation?”

This issue was addressed recently by the Supreme Court of New Zealand, which ruled on whether a person’s powers under a trust deed could be treated as “property” under the Property (Relationships) Act 1976.

Case Overview: Trust Powers vs. Relationship Property

A couple ended their 10-year de facto relationship, sparking a dispute over relationship property. The man (Mr. P) had helped set up a family trust during the relationship. His ex-partner (Ms. C) was not a trustee or beneficiary, but she argued that Mr. P’s control over the trust gave him effective ownership of its assets—making it relationship property.

The key legal question:
Do an individual’s powers under a trust deed amount to “property” for relationship property division?

What the Court Decided

The Court carefully reviewed Mr. P’s powers under the trust deed. While he had influence, the trust required at least two trustees and did not give him unlimited discretion to remove beneficiaries or appoint all assets to himself. His powers were further limited by fiduciary duties, such as acting in good faith and for the benefit of all beneficiaries.

Therefore, the Court ruled that Mr. P’s powers did not meet the threshold of “property”, and the trust assets were not included in the relationship property pool.

This contrasted with the earlier Clayton v Clayton case, where a trust deed gave one person near-total control—including the power to make themselves the sole beneficiary—effectively making the trust assets relationship property.

Key Takeaways for Trust Protection

If you’re concerned about how a family trust could be challenged in a separation, consider the following:

• Review the trust deed: Ensure it limits powers to appoint or remove beneficiaries.

• Avoid sole trustee control: Use multiple trustees to prevent individual dominance.

• Limit general powers of appointment: Especially those that allow self-benefit.

• Understand fiduciary duties: These obligations protect the trust from being treated as personal property.

Need Legal Advice on Relationship Property and Trusts?

At Core Legal, we offer cost-effective fixed-price consultations to help you understand your rights, protect your assets, and structure your trust appropriately.

Whether you’re setting up a trust, separating from a partner, or managing an existing trust, our experienced team in Wellington and Masterton is here to help.

???? Contact Core Legal today to book your initial consultation.