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Protecting wealth from your child’s estranged spouse - can it be done?

With the desire to provide for their children long after they are gone, we are often approached by clients wanting to know the “safest way” to give assets to their child without it potentially becoming relationship property. In a qualifying relationship, relationship property is divided between the parties when the relationship comes to an end. When transferring an asset to your child who is in a relationship, it is highly likely that the asset will be converted into relationship property and in the event the relationship ends by separation, your child’s estranged partner will entitled to a half share.

To protect an asset from future claims, we will often advise a client to establish a family trust through which to hold the assets for the benefit of their child.

The robustness of this arrangement was recently affirmed in a New Zealand High Court case. In the 2016 High Court case of Da Silva v Da Silva, Mrs Da Silva’s mother (Mrs Perris) established a trust for the benefit of herself, her daughter and, her daughter’s children. The trust was established to the exclusion of the daughter’s husband (Mr Da Silva), even though the pair had been married for some time. The Court held that the trust was not a “post-nuptial settlement” and that section 182 of the Family Proceedings Act 1980 (“FPA”) did not apply. As such, the husband was unable to intercept the trust’s wealth. Had section 182 of the FPA applied, then the Court would have the power to rewrite the post-nuptial settlement and the husband could potentially have become entitled to a share.

If you are considering transferring wealth to your child then talk to us first, your straight talking local lawyers.

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