The Law Commission are updating NZ’s divorce laws. In this article, I talk to Victoria Young from the NBR, about the upcoming changes to trusts and the current 50/50 split of relationship property.
Top lawyers hope proposals are made to bust trusts and rules affecting stay-at-home partners are clarified as guidance into who gets what after a relationship breaks down is released this week.
The Law Commission will indicate its preferred approach to the Property (Relationships) Act on Thursday. The release follows Otago University research, which has found the public no longer thinks a 50/50 division of assets is fair.
Turner Hopkins lawyer Sharon Chandra says early indications are that there will be changes to trusts for non-married couples in relationships.
Despite this country’s love of trusts – there are between 300,000 to 500,000 trusts in New Zealand, she says this area is overlooked by the current regime.
“What I would hope to see is that part of the recommendations extended into the PRA so for other couples it falls under this umbrella.”
Ms Chandra says trust issues come up more frequently in cases now and as a practitioner this is her No 1 concern.
Barrister Jeremy Sutton adds that trusts are a “messy situation” at present, despite the landmark ruling of Clayton v Clayton, because there are several compensation provisions, yet no certainty.
Career sacrifice and the 50/50 rule
Otago University’s survey shows New Zealanders no longer think a 50/50 division of assets after separation is fair. As well as looking at how to divide assets brought into a relationship, such as a house, the survey asked about economic disparity after a relationship split.
This was highlighted in last year’s Supreme Court ruling of Scott v Williams, in a case where one partner was a law firm partner but the other who had trained as a lawyer put her career on hold.
The university’s research asked whether a stay-at-home mum should receive additional financial support after separation. Some 59% of those surveyed said she should while 35% said she should not. The other 6% of respondents said either it depends or they didn’t know.
Those who answered the stay-at-home partners should get support were also asked how that should be addressed.
Almost half of respondents, 49%, said those who stayed home should get a share of the other’s future income for a set period, while a third said they should receive more at the time of the split.
Other responses included, it depends on who looks after the children, other, or they didn’t know.
The researchers also found bias against men when it changed the names of respondents from male to female names. When the survey had a question with a male as breadwinner, 68% of respondents thought the partner should get compensation for putting their career on hold, while in scenarios where women put their careers on hold, only 51% thought their male counterpart should get compensation.
Who gets what
Ms Chandra says if 50/50 is not the rule, it is not yet clear what it should be.
“Lawyers have had to rely on case law to advise our clients and awards had been modest but, with the Supreme Court ruling, that was a new and novel approach. It created claims of much higher sums awarded in legal history,” she says.
Mr Sutton says an option before the Law Commission may help business owners and entrepreneurs who can face cashflow problems after a marital split.
He says in the early days of a relationship, business owners should be clearer about how they separate their interests, although modern technologies such as Xero mean the previous situation of one partner taking on accounts and administrative roles to support an entrepreneur are less common.
There are three approaches to section 15 of the Property Relationships Act, known as the economic disparity provision, and one option is that former partners could be awarded a lump sum to address the disparity but that sum could be paid out over time.
“One of the problems I get with people in business is that paying another partner out is very challenging even if the business is profitable.
“A situation where an ex-partner is paid $500,000 a year for five years or something could allow the other to keep the business and that’s now on the table.”
Mr Sutton says he hopes the Law Commission might also encourage more mediation to take place between parties, as cases are taking on average 13 months to get through the courts.
This article first appeared in the National Business Review.