Trusts are everywhere in New Zealand. They are so common that many people barely think twice about them. Your family home might be owned by a trust. A business you run, a farm, an investment portfolio or even your bach could be sitting inside one.
For many couples, the trust was set up years ago – sometimes long before the relationship began – and usually for sensible reasons. Asset protection. Succession planning. Tax efficiency. Helping children in the future.
What rarely happens is this conversation: “What happens to the trust if we separate?”
At Clean Break, we see the consequences of that missing conversation every day. Trusts can add a whole extra layer of complexity to separation. They can create confusion, delay, extra cost, and deep feelings of unfairness.
But a trust is not an automatic dead end.
While trust property is not divided in the same way as relationship property, the law does provide ways to deal with trust assets when a relationship ends and you cannot agree on how things should be sorted. You just need to know where to look and how to approach it.
This article explains:
- why trusts complicate separation;
- the most common misunderstandings we see; and
- the five main legal pathways the courts use to deal with trust property.
You don’t need to understand every legal detail. What matters is knowing which pathway might apply to your situation and who to talk to for more information.
Trusts are common – and so are misunderstandings
There are no official statistics, but in 2024 the Ministry of Justice estimated there were somewhere between 300,000 and 500,000 trusts in New Zealand. While the number of trusts will likely drop with recent trust law changes, a significant number of families are still affected by trust structures, sometimes without realising it.
If one or two of those trusts belong to your family, you are not unusual.
What is very common, though, is misunderstanding how trusts work at separation.
A phrase we hear often is:
“It’s all in a trust, but we’ll just split it 50/50 like everything else”.
Unfortunately, things don’t always work that way.
Trust property is not relationship property (at least not directly)
Legally, trust property does not belong to either partner. It belongs to the trust itself and must be managed by the trustees for the benefit of the beneficiaries, in line with the trust deed.
That means trust assets:
- cannot simply be divided between partners; and
- are not automatically subject to the usual 50/50 rules.
That does not mean trust property is untouchable. It does means the law takes a different route to sort out your property interests.
Why trusts complicate separation
Trusts tend to make separation harder for a few key reasons:
More Paperwork
Even when all trustees agree on how the trust-owned property should be resolved, dealing with trust-owned property involves significantly more paperwork (and legal fees) than when all property is owned in personal names. claims that apply easily to personally owned property don’t translate neatly when a trust is involved.
Different rules
Some claims that apply easily to personally owned property don’t translate neatly when a trust is involved.
Control and power
Often one person has significantly more control over the trust than the other, for example, as a sole trustee or appointor.
Expectations
During the relationship, both partners may have expected to benefit from trust property, such as living in a trust-owned home.
Contributions
One partner may have contributed money, labour, or unpaid work that increased the value of trust assets they don’t legally own.
Timing
Trusts are often set up, changed, or funded at sensitive times, sometimes close to a relationship starting or ending.
Because of this, trust cases can be more stressful, slower to resolve, and harder to predict. The best way to manage this is by ensuring you and your partner both have lawyers who are experienced in resolving trust property at separation.
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