This article was published on 23 February 2013. Some information may be out of date.


  • Relationship property — when does the clock start ticking?
  • One way — plus a few others — that a mother could protect her daughter’s inheritance
  • Trusts not so cheap to set up
  • Should people get access to their money when KiwiSaver changes?

QIn a recent column you included a Q&A about relationship property.

Your expert said that after three years of living together the home the couple was living in, and the chattels, become relationship property if they split. She said that property, “will be divided 50/50 between the couple regardless of the source of the funds having been inherited.”

Let’s say a couple has been living together for more than three years. Then one inherits money and buys a house with it and they live in it. But just a couple of months later they split. Is the house then relationship property?

In other words, is it three years living together anywhere, or three years living together in the house owned by one of them that matters?

A“The home would be relationship property despite the fact that the couple only separated a few months after moving in,” says Deborah Hollings Chambers QC.

Under the Property (Relationships) Act 1976, “the family home is defined as being the home used immediately before separation as the principal family residence,” she says. “After three years of living together it is the use of the property at separation not the time of acquisition.”

She adds that a High Court decision, Newman v Lee, concerned a couple who moved into a house that the man owned largely from inheritance. The couple separated only a year later. “The husband alleged the wife had engineered the move into the home to take advantage of the property regime. Nevertheless, the High Court upheld the Family Court decision that it was indeed the family home.”

This strict regime can be departed from in “extraordinary circumstances”, says Hollings Chambers. “However, plenty of people have argued their circumstances were extraordinary and lost. The Courts have been quite strict that “extraordinary” means extraordinary, ie ex-nun marrying multimillionaire and separating after three and a half years.

“If the fact scenario involved a very significant inheritance then I would suggest it may come within the extraordinary exception, but there would be no guarantee.”

QAs your legal person said in a recent column, setting up a trust to prevent a partner from getting part of your house if you split can have “potential adverse impacts on loving relationships,” which is all very dry and proper. But I’d paraphrase it more bluntly as, “Telling your partner you don’t trust them is sure to do damage, and perhaps end, the relationship.”.

As an oldie, married many years, I’m well aware that any lifetime relationship comes with its difficult times, and something like that is going to be the elephant in the room that wrecks everything.

However, here’s a solution for the mother who was worried her daughter’s inheritance would be halved if her partner left her. Could the mother stipulate in her will that she leaves the lot to care for stray cats, unless her daughter sets up a trust with independent management, and maintains the inheritance completely separate from the relationship property? If the daughter does that, the money goes to the daughter.

That way the (dead) mother gets the blame, the daughter gets the ongoing inheritance, and the partner is not soured on his lot and can spit on his mother-in-law’s photo when he goes past.

ANasty! But I take your point.

Whether your idea would work would probably depend on whether the daughter wanted it to work. She may welcome the opportunity to keep the inheritance out of the hands of her partner, without taking the “blame” for doing that.

On the other hand, she wouldn’t have direct control over the money. If she wanted more control, she “may well have a claim under the Family Protection Act 1955 in regard to a moral entitlement to inherit directly in her own name,” says Hollings Chambers. “That Act gives Courts power to rewrite wills.”

She suggests other ways to address the situation, as follows:

  • “The parent could set up a trust prior to death with the child as a beneficiary, and appoint trustees who the parent knows will take proactive steps to make sure the child’s interests are protected from relationship property claims.
  • “The parent could talk to the child about the benefits of seeking legal advice, and express the wish in her will that the child takes all necessary steps in the future to protect her inheritance from any claims under the Property (Relationships) Act 1976 including seeking legal advice.
  • “The parent could also say now to the child ‘I am intending to leave property to you when I pass on, but I am concerned that it will go “sideways” to your future partner. I want you to get a section 21 agreement (that would overrule the Act) and I want to see it, and that will make a difference in terms of how I structure my will and how much I leave to you’.”

Compared with your stray cat idea, each of these ideas has fairly obvious pros and cons.

Along similar lines, parents who want to give their children financial help while the parents are still alive sometimes say, “I will not assist you financially unless you obtain a section 21 agreement from your partner”.

Says Hollings Chambers, “That seems to me to be reasonable and not unjustified for fairly obvious reasons. I agree it can help in terms of protecting the child and protecting the relationship to be able to present the requirement for a section 21 agreement as coming from a parent.”

It may not be so good for the relationship between a parent and a son-in-law or daughter-in-law, but that’s hardly as important as the relationship between two partners.

QI’m a tax and trust lawyer, and I’m also the Chairman of the New Zealand Branch of the Society of Trust and Estate Practitioners (

I feel the need to comment upon the suggested cost of establishing a family trust.

Your article said: “Hollings Chambers says a colleague tells her a trust for this purpose would not be difficult and would cost about $480 plus disbursements to establish.” This seems to be an unrealistically low fee. Perhaps Ms Hollings Chambers’ colleague outsources his trust work to Mumbai, or to a retired accounts clerk in Hokitika.

Whilst it is conceivable someone could ‘knock out’ a rudimentary trust deed for $480 (whilst providing negligible advice), the reality is there is a lot more to putting a trust structure in place than simply executing a trust deed. This extends to deeds or contracts recording the sale or transfer of assets into trust; deeds of gift; a memorandum of wishes, and usually a new will.

As the Law Commission has recently observed, many people have trusts without really understanding what trusts are or how they work. There is a danger in treating a trust as a commodity or entity to be plucked off a shelf.

A diligent lawyer will need to spend time explaining how the trust will work, and assisting the client in making certain choices and decisions in the design of the trust, for example, who should hold the power of appointment of trustees, and the choice of successor appointors.

People should feel free to shop around for a good deal, price-wise, as long as they realise that quite often you get what you pay for. Quality work, usually at a more expensive price, often provides the best overall value for money.

AThanks for writing. Apparently Deborah Hollings Chambers’ colleague was talking about just drafting a simple trust, and not considering the other work that goes with it.

At least I hope that’s the case. Your alternative explanations — about Mumbai and Hokitika — are a bit of a worry.

More to come next week on relationship property, an issue readers clearly feel strongly about.

QI was interested in your recent comment on there being no guarantees with KiwiSaver. I was reminded of the changes in 2008 that reduced the employer contribution to 2 per cent from 4 per cent.

I wrote to my local MP at the time asking whether the government would allow me to opt out of KiwiSaver due to the fundamental change in the investment conditions, but didn’t get an answer.

The change, whilst possibly a sound financial decision for the nation, was akin to lodging a term deposit with a bank only for the bank to change the interest rate whilst not allowing you to take your money elsewhere.

I would have thought there was some obligation on the government to allow KiwiSaver investors a choice whenever the terms and conditions are changed — but apparently not. So is there any guarantee? Well definitely not in relation to the above!

AJust to put the record straight, the employer contribution was never actually reduced.

When KiwiSaver began in July 2007, there was no compulsory employer contribution. It started at 1 per cent from April 2008 and rose to 2 per cent from April 2009. It had been scheduled to rise to 3 per cent in April 2010 and 4 per cent from April 2011, but those two rises were cancelled before they took effect.

Nevertheless, that cancellation was, indeed, a change in the investment conditions, as you put it. But it’s not quite the same as a bank changing a term deposit interest rate midstream. Here’s why.

In 2008–2009 and the following year, you got the employer contributions you expected. If you didn’t like it when the government announced — well in advance — that there would be no rise to 3 per cent from April 2010, you could have taken a contributions holiday from then on.

The thing about KiwiSaver is that the incentives are linked to the money you contribute each year. When you made your contribution in 2008–2009, the government and your employer greatly boosted your contribution. From then on, the 2008–2009 money has grown and will keep growing, coming out in retirement much higher than it would have been if you had been saving on your own.

Any changes to KiwiSaver after 2008–2009 don’t affect that money. Likewise the money for the next year.

That’s why I’ve always said that while different governments are sure to change KiwiSaver — because no government can ever bind future governments to anything — that’s no reason not to join. You take the good deal while it’s going, and just stop contributing if you don’t like future changes.

Given that the government gave you a fair bit of money in 2008–2009 — and since — it’s reasonable to expect you to tie up theirs and your money until retirement. After all, it’s not as if you’re really losing out. It’s still your money.

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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.