When couples in New Zealand separate or divorce, one of the more complex legal issues that can arise is how a family trust is treated. While family trusts are a popular way to protect assets, they can complicate matters during a separation, especially when trust assets appear to benefit both partners during the relationship.

At Core Legal, based in Masterton and Wellington, we regularly advise clients on how family trusts are dealt with during separation or divorce, including the impact of nuptial settlements.

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???? What Is a Family Trust?

A family trust is a legal structure used to hold and manage assets on behalf of beneficiaries—often including the couple and their children. Although the trust technically owns the assets, issues can arise when those assets were intended to support both partners during the relationship.

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???? What Is a Nuptial Settlement?

A nuptial settlement refers to any arrangement made during a marriage or civil union that provides ongoing benefit to one or both spouses. This can include a trust created during the relationship that holds shared assets, particularly when both partners are beneficiaries.

If a nuptial settlement exists, one partner may have grounds to claim a share of the trust property, even though the assets are not jointly owned in the usual sense.

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✅ Can You Make a Claim on the Trust?

To challenge a trust as a nuptial settlement, four criteria must be met:

1. The couple was legally married or in a civil union.
2. The Court has granted a dissolution order (divorce).
3. The application is made within a reasonable timeframe of that dissolution.
4. There is a clear link between the trust and the marriage, classifying it as a nuptial settlement.

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⚖️ How the Court Decides

The Court will assess whether the trust qualifies as a nuptial settlement and then consider:

• The nature of the trust and its relation to the marriage.
• The financial positions of both parties before and after separation.
• The most equitable way to address the imbalance, if any.

The Court has wide discretion and may:

• Order a lump sum payment to one party.
• Appoint new trustees.
• Resettle the trust, effectively splitting it into two separate trusts.

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????️ How to Protect Your Assets

To avoid disputes over trusts in the event of separation, it’s crucial to have a relationship property agreement (also known as a contracting-out agreement). This agreement sets out how assets, including any trust property, will be divided and helps avoid nuptial settlement claims.

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????‍⚖️ Get Expert Legal Advice

If you’re separating or planning to separate and have a family trust, it’s vital to get clear legal advice on how your trust may be impacted. At Core Legal, we provide cost-effective, fixed-fee consultations to help you understand your rights and protect your interests.

???? Contact our experienced family and trust lawyers in Masterton and Wellington today to book a consultation and safeguard your future.