Recessions bring about all sorts of changes. For illustration, in the legal world, frequently people stop purchasing homes, so lawyers administrate out of conveyance work. Conversely, money starts to get tight so people start to sue each extra. This of course means extra litigation work for the lawyers.

Recessions can also bring about some dramatic individual life changes. For instances, people can be made redundant which in turn, creates monetary burden. frequently, this pressure spills over into their individual associations. When this happens, regrettably some couples split.

When a couple split they usually divide up their possessions. If their possessions have been put in a Trust the expected problem arises: What occurs to the possessions in the Trust? This inquiry is of huge worth since when a relationship breaks down, there can be a lot of fighting happening and commonly the only thing left standing is Trust.

Avoidance is Better Than Cure

Foremost, before possessions are placed in a Trust, all individuals should find first-rate legal advice. This is enormously critical because when assets are transferred from an individual to a Trust, an Individual property rights are affected.

Secondly, the legal advice obtained by the parties will commonly include a very strong recommendation for the parties to enter into a legal Property Liaison Contract. Should a relationship break down after the assets have been moved through to the Trust, this Agreement will become invaluable. The individuals will be saved a huge legal bill as they will not have to go to Court to argue over the material goods.

Thirdly, an actual Contract should be entered into between the parties. The Understanding, if prepared and executed, is likely to set out a range of matters including an acknowledgment of what assets belong to each of the parties before those resources are transferred to a Trust. It may also set out what will occur to those material goods when they are transferred through to a Trust should the parties ever separate.

Lastly, if an Promise has been entered into by the parties and resources have subsequently been moved to the Trust then the issue is pretty uncomplicated. This is of course providing the Agreement stated what was to occur should the parties ever break up.

In the normal course of dealings what this means is the material goods of the Trust are sold, loans are repaid and the balance of the sale proceeds are put into the trust’s bank account, ready for division between the parties.

Often at this point in time the existing Trust is made into one of the folks own Trust and another Trust is set up for the added remaining party. So in effect, each of the parties ends up with their own Trust.

Then half the sale proceeds are sent to the new Trust and the extra half of the sale income simply remains in the on hand Trust (which was earlier turned into one of the individuals Trust).

Two is Better Than One

It’s no secret that many smart people have two trusts. One each. Each Trust will hold its own resources and commonly a half share in the ancestors home. Why have two Trusts rather than one? If you have two Trusts you have the ability to deal with property that was solely your own before it went to the Trust. This could include family heirlooms.

Also, your own Trust can be the recipient of any inheritances you might be given, such as money from your own Parents.

Overall, having your own Trust means you can deal with the possessions in the Trust as you and your Trustees wish. You can do this without the consent of your partner (assuming they are not your Co-Trustee).

When Things Go Wrong

If the parties don’t ever enter into a legal Contract and cannot come to an agreement on what is to happen with the material goods that are in the Trust, problems can occur.

When this happens only the lawyers win. The danger is, that struggle costs lots and lots of money if it goes on for a long period of time. I’m not advocating that an individual shouldn’t take on lawyers when and where they are needed. All I’m saying is a little common sense needs to exist in these situations.

But if you can’t get an promise, then what occurs? Well the subject just has to go to Court. Which means the Courts look at how the Trust was organised, how the Trust has been direct over the years, who has control of the Trust, what possessions have been transferred to the Trust and what loans the Trust owes back to the folks.

Supplementary matters can also come under inquiry but in the main, these are the points the Courts will look at. Once the Courts assess the subject they may make a range of Orders. These can include putting an objective individual in to manage the Trust (act as a Trustee) as well making a financial award.

Janet Xuccoa BCom LLB, is a Family Trust specialist and accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is an accounting firm specialising in property and New Zealand Accountants

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