learning how to share

really good interview on radio nz yesterday (nine to noon, 21/7/09, 9.29am) regarding matrimonial property settlements. there are a couple of cases that have the potential to change the way property is split when relationships end. deborah has covered issues around the case pretty well here. and part of the interview on radio nz is with the the barrister anthony grant, quoted in the herald.

the radio interview gives more details of the case, and shows that the courts have not been nearly so generous as the media coverage would lead us to believe. under nz relationship property law, there are two types of property. "relationship property" is deemed to be jointly owned, and is split 50/50 on separation. "separate property" is property that belongs to one partner in the relationship, usually as the result of inheritance or gifting. ie the theory is that the other partner hasn't had a hand in creating that property so has no rights to it.

the recent ruling by the supreme court has now made a bit of dent in the split between relationship property and separate property. because the court ruled that the wife should have a part of the increase in value of the separate property. ie she didn't get a share in the property itself, but only in the increase in value over the term of the marriage. and she didn't even get a share of the total increase in value, but only that part of the increase that could be attributed to actions by either partner. in other words, she didn't have any claim to any of the increase that was a result of inflation.

and, on top of all that, she didn't even get 50% of a part of the increase in value. she got 40%, and this was after twenty-four years of marriage. but that's not all folks, there's more! the 40% didn't just include her "indirect" contribution ie the fact that she did the bulk of the housework and child-rearing so that her husband was free to work on and improve the farm. it also included the fact that she had been a financial contributor to the marriage because she had put her own earning towards reducing the indebtedness of the husband. so not even the whole 40% of part of the increase in value was reflective of her "indirect" contribution.

and this judgement is supposed to, according to anthony grant, have wealthy people shaking in their shoes. uh-huh. listen to him in the interview. he skips over the increase in value part very quickly, and in every other sentence emphasises the fact that it was the "indirect" contribution that was given a value - not direct work on the asset, you understand. not any money-making activity. but housework. given a value. as if this is a bad thing. as if it's wrong to recognise that one partner doing all the housework and childrearing gives the other partner more free time to make money. as if the court was overly generous.

and then mr grant provides three solutions to try to avoid such a terrible thing happening. which, as deborah's post covers, includes a tightly worded pre-nup agreement; settlement of property in a trust; or hiring of a housekeeper/nanny. deborah debunks the housekeeper/nanny thing pretty well: as if a salary of $15,000 a year can replace the love, care and attention of a parent!! pathetic.

and the courts are looking to deal with the first two options. in this particular case, the couple had a pre-nup agreement, and the court set it aside. mr grant thinks this was because the agreement was badly worded, and a better worded one would have protected the property. he's the lawyer, not me, but without reading the judgement, could i venture to suggest that the court might look past any contract that provides a very unfair outcome? it's a possibility, especially if your pre-nup agreement sets the value of "indirect" contributions at zero.

the second option of vesting the property in a trust is also now looking shaky. this is because the court of appeal has ruled on a case where the farming business (excluding property) was put into a company, with shares owned 50/50 by both partners. they then vested those shares into a trust (which trust, it appears, owned the property as well).

on separation, the wife's only asset was her share of the loan to the trust, created when they transferred the farming business into the trust. except that she had been gifting it off over the years at the maximum amount allowable of $27,000 (if you want to avoid gift duty, that is). so, it turned out that she had to move out of the homestead with the kids, while the husband stayed on the farm and continued to farm it. and she got no income from the trust.

the court has understandably seen this as an injustice, and has ruled that the property of the trust be resettled into two trusts, one of which will basically be for her benefit. in other words, the court has busted the trust. very scary stuff for our mr grant. fortunately for him, the case is being appealed and will now be heard by the supreme court. the wife may yet be kept in poverty and her contributions, direct or indirect, may yet go unrecognised. watch this space.

one of the reasons i identify with this case is because i've recently seen another where a wife was persuaded to forgo her interest in rather considerable assets after her death, on the basis that the family assets should go to the children of her husband (it was their second marriage). which means that her own kids (who aren't his) will get nothing when she dies. this despite the fact that she spent over two decades working directly on the farm, forget about any indirect work she might have done. but none of that was taken into account, and her rights to wealth she created in her lifetime have been signed away.

the moral of the whole story, according to mr grant, is to indulge in more legal manouvering to try to protect your property. of course. create more work and hence more income for your lawyer. the moral according to me is to stop being so f***ing greedy, and recognise that your partner has a right to wealth they helped to create, be it directly or indirectly. if you're not prepared to share fairly, don't enter into a relationship.