Many people assume that placing assets in a family trust will fully protect them from relationship property claims. However, New Zealand courts have increasingly scrutinized trust structures, and in some cases, trust assets can become relationship property.

At Core Legal Masterton & Wellington, we specialize in relationship property disputes involving family trusts and can help protect your interests.

How Can Trust Assets Be Treated as Relationship Property?

Several legal cases in New Zealand have demonstrated that trust assets may be subject to division in a separation, depending on how and when they were transferred into a trust.

1. Transferring Assets into a Trust to Avoid Relationship Property Claims

One key case, Sutton v Bell, involved a man who transferred his home into a trust just before his relationship became legally recognized. The Supreme Court ruled that this was done to defeat a future relationship property claim and set aside the transfer.

???? Lesson: If assets are moved into a trust before or during a relationship to avoid a partner’s future claim, the courts can overturn the transfer and reclassify the asset as relationship property.

2. Benefiting from a Trust During the Relationship

In C v C, a woman successfully argued that her husband’s family trust assets should be included in their relationship property division because she had contributed to the farm that was held in the trust.

???? The court awarded her $900,000 as a share of the farm’s increase in value and $300,000 for her share in the family home.

???? Lesson: If one partner benefits from trust assets during the relationship—such as living on a trust-owned property or contributing to its development—this can increase their claim on trust assets after separation.

3. Direct Contributions to Trust Property

In Johnstone v Easterbrook, a woman contributed over $51,000 to her partner’s family trust for property development and debt repayment. The court ruled that since her contributions directly improved trust assets, she was entitled to a 35% share of the family home’s value—$275,000.

???? Lesson: If a person contributes money or effort to trust assets with the expectation of financial recognition, courts may award them a share of the trust’s property value.

Can You Protect Trust Assets from Relationship Property Claims?

✅ Contracting Out Agreement (Prenup) – A legally binding agreement between partners can help ensure that trust assets remain protected.
✅ Proper Trust Administration – Trusts should be set up and managed correctly to ensure they operate as true independent legal entities.
✅ Legal Advice Before Transferring Assets – Seeking legal guidance before moving property into a trust can help reduce relationship property risks.

Get Expert Legal Advice on Trust and Relationship Property Matters

Navigating relationship property disputes involving trusts can be complex. At Core Legal Masterton & Wellington, we offer fixed-price legal consultations to help you understand your options and next steps.

???? Contact us today to protect your assets and secure your legal position.