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Supreme Court Awards Spouse 40 percent Of Inherited Property

AUTHOR: Matthew Gilligan

POSTED: 19 July 2009

In case you missed it over the weekend, the NZ Herald article on a woman being awarded a share of her husband's 'inherited property' that pre-existed the relationship rewrote some relationship property rules.

What Happened?

The Supreme Court held that a woman who helped maintain an inherited farm property (that pre-existed the marriage) was entitled to 40% of the growth on the property that occurred during the relationship.

Why?

Because she contributed to the maintenance of the house by performing domestic chores and by earning income.

Why is this a change?

It was generally accepted before this case that inherited property that pre-existed a marriage is separate relationship property and not subject to 50/50 split on divorce.

Comment

Personally I think the case is fair - she did contribute to the relationship so why should it not be shared property, given she contributed to the property's upkeep? The plaintiff's counsel noted the farm would have likely been forced to be sold, but for her income being used to support bank payments.

If you wish to avoid this happening, put your property in a trust and ask your spouse to sign a relationship property agreement. The latter (relationship property agreement or S21 agreement) makes it very clear that the property is not intended to be joint relationship property. Such agreement is much easier than an expensive fight later on, and perhaps easier to put in place earlier than later.

The trust is a great thing to do before the relationship commences, but is weakened as a defence to a claim if set up during the marriage and the property is transferred during the relationship. If you wish to do this during the marriage, the S21 agreement is essential to stop spouses 'tracing' their potential relationship property interest into the trust.

If you'd like assistance with protecting your assets by setting up the right tax and legal structures, contact us at GRA - [email protected], phone +64 9 522 7955 or via our website.

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Matthew Gilligan
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

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