Law Commission asks: Is law working for dividing assets?
When Frances* left her husband after 20 years and four children together, she did not anticipate how hard it would be to get her half of their assets.
The split was acrimonious and negotiations had to be done through a third party.
"I had to make choices at every step around the cost of the lawyer and the likelihood of a positive outcome," she said. "I might have gotten more if I had gone to court but I was at the limit of my resources."
She walked away with a car and $14,000 of her former husband's KiwiSaver. She had to pay $700 to have the order made to transfer it.
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The biggest asset that emerged as a result of their partnership was her husband's income. He now earns $40,000 a year more than she does – up from $5000 difference at the start of their relationship.
She took 12 years out of her career to look after their children.
It is issues like these that will be considered as the Law Commission reviews the 40-year-old Property (Relationships) Act, which sets out the rules for dividing property in a break-up. It will launch a paper on Monday seeking public feedback.
"Dividing property when a relationship ends can be challenging," commissioner Helen McQueen said. "The law needs to help people resolve their relationship property matters in a just and efficient way."
Among the questions to be considered are whether the law applies to the right relationships, whether the right property is being shared, how the law meets the interests of children, and what should happen if one person is financially worse-off.
McQueen said much had changed since the law was first enacted. Now, 46 per cent of children are born to unmarried parents. The way relationships start, end and how people repartner has also changed.
"Repartnering is something that is extremely complex from the perspective of dividing property," McQueen said.
There were questions about whether the right de facto relationships were being captured by the law, she said. More people were partnering later in life and choosing to keep their financial affairs separate.
"If people do bring property into a relationship and have a very strict sharing regime where they each pay half the food and half the rent or mortgage, do they actually have any expectation they would share property at the end, or do you they expect to walk away with what they brought to it?"
McQueen said the review would consider what was counted as relationship property. It was possible that could include the ability to earn income, if the relationship had allowed one person's career to advance ahead of the others.
"There are a lots of hard things about that. It's not easy to value someone's earning capacity... they have to go on and earn it, earning capacity doesn't just sit there waiting to be divided as a monetary sum."
Lawyer Selina Trigg, who specialises in family law issues, said the law as it stood seemed straightforward on the face of it.
"Equal division of assets for most couples is something that's easily understood by most people knocking on my door."
But she said closer scrutiny often revealed unfairness. There were problems in particular in relation to the section of the law that dealt with economic disparity. Trigg said it had not lived up to its potential.
"The focus has been on compensation for a spouse for loss of income and earning ability due to their domestic responsibilities rather than looking at the positive enhancement to the other party's career and income-earning abilities that was aided by the spouse holding down the fort and looking after the kids."
McQueen said the review would also consider the role of trusts. She said it was astounding how many New Zealanders held property in a trust structure.
"One wonders if they know precisely why they have it."
West Auckland woman Anissa Ljanta was burnt by one. It was not until her relationship of 10 years ended that she realised the document she had signed, which she thought gave her an equal share of their assets, listed her only as a discretionary trustee of the trust holding the property.
"I went into the legal process expecting it to be simple as we had already agreed and just needed to have the legalities for the bank to release the funds. I was shocked when my lawyer explained what discretionary trustee meant and even more shocked when my ex reneged on our agreement. I signed that when my son was a baby that hardly slept, I loved the guy and wasn't going to go to a lawyer to question him. I should have done," she said.
"I left with $200 in my bank account because he had control of the finances. I did get something in the end but nothing near half the equity in the house."
She said she was left unable to buy another house for her and her son. "It's been really hard for him. We moved into a rental after the breakup and we've just had to move again. If we have to move every year – in our area to find something suitable took three months."
She would not get back to the financial position she was in when she was part of a couple, she said. She works in the charitable sector while her former partner is a financial director earning a much higher salary. "That's not what I want. It's not about how much money I could get, it's what felt fair. We had agreed and I got blindsided."
She is launching The Trust Project, to share the experiences of other people who have been caught out.
The rewritten Trusts Bill, which will update and improve the law around trusts for the first time in 60 years, has had its first reading in parliament.
Ljanta said she wanted to raise awareness about the current laws so that people were informed and could protect themselves.
The Law Commission is seeking feedback on its work until February and will report to the minister next year.
* Frances did not want her full name used, to avoid identification.
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