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What’s Mine is Mine…or is it?

November 23, 2010

What would you do in this scenario?

You separate from your husband or wife after 25 years of marriage. Prior to your marriage, your spouse owned a farm that he or she inherited. During your marriage, you work part time and help run the home and look after your children. Your spouse runs his or her farm, developing it and the farm increases significantly in value. Would you expect a share of the farm upon separation?

This was exactly the problem faced by Mrs Rose when her marriage ended and Mr Rose claimed she had no interest in the farming properties he owned in partnership with his brothers, he having inherited an interest in the properties prior to their marriage. The case worked its way through our Courts, appeal after appeal,  until the Supreme Court made a ruling in May last year. That ruling provides serious warnings for those of us who consider we own property that our partner should have no interest in.

The Property (Relationships) Act 1976 distinguishes between property that is relationship property (to be shared equally by both parties to the marriage, de facto relationship or civil union) and separate property (that remains owned by the partner to whom it belongs and which the other partner has no claim to). 

Separate Property can sometimes become relationship property. Once it does so, it becomes subject to the presumption in the Act that  it will be split between the partners 50-50. Situations where separate property can become relationship property include: 

  • If you both use the separate property as your family home, then it will become relationship property and will have to be shared equally between you;
  • If the separate property is sold and used to pay for relationship assets or debts, it will no longer be separate property.
  • if you contribute to increasing the value of your partner’s separate property, that increase in value becomes relationship property to be shared between you.

 Mrs Rose hadn’t directly financially contributed to Mr Rose’s farms and their increase in value. However, she argued that she made a number of indirect contributions during the marriage which included raising the children of the marriage and working part time to supplement the family’s income.

Mrs Rose contended that her indirect contributions should entitle her to a share in the increased value of the properties. Despite the indirect nature of her contributions, the Supreme Court agreed with Mrs Rose and awarded her about $600,000, almost half the increase in the value of the properties.

This decision raises serious warnings for people who think “my property is mine”. Except perhaps in the situation of investments earning interest, most people with separate property will be hard pressed to prove their spouse hasn’t contributed even indirectly to the increase in the value of their “separate” land or business. Farming families, in particular, should pay heed to the decision – farms are often passed in families from one generation to the other and the long periods of time that they are held for means the farm usually increases in value significantly.  Even if your separate property is an interest in property that is actually owned by a “family trust”, similar claims can be (and have been) mounted against that property.

If you are intending to leave property to a child in your Will, you should turn your mind to the risk of that child’s partner ending up with a claim to that property in the event they separate from your son or daughter. Some careful estate planning can assist you avoid this.

If you own property that you think your partner has no interest in or claim to then it is important to seek immediate advice from a family lawyer to ensure your property rights are adequately protected.  Rose v Rose sends a clear message that some time and money spent now on some careful estate planning and completing an agreement with your partner to clarify “who gets what” on separation (called a “Contracting Out Agreement”) could save you from some very costly and thorny issues if you separate or one of you dies.

If you want  help with a family law issue, go to www.familylawresults.co.nz.

One Comment
  1. Kishore Chand permalink

    what if husband left everything in trust and she only gets funds to live

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