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Matrimonial relationship claims and separately owned property

It is important to realize that whenever a person inherits property, Matrimonial Property provisions still regard this as Separate Property which does not fall down for division in the event of a marriage/relationship breakdown. In practice, however, we unfortunately experience that this Separate Property,is quite often converted into Matrimonial or Partnership Property,during the course of a marriage or relationship, and  often it happens unintentionally. When that happens, it will be divided equally and half of it may be lost in a marriage or relationship split-up. (Most people find that it imposes enormous stresses on their relationship if that property is managed separately during the course of their relationship or marriage).

Family Trusts provide the solution, because such property always stays separately owned, no matter how intermingled it becomes with other assets .

When such a property is transferred into a Family Trust, the married individual who is the Settlor, will from then on have only an interest as a Discretionary Beneficiary.  It will remain outside the scope of Matrimonial Property  Law provisions when such a transfer to a Trust has taken place at the right time. This will also apply to other relationships (de facto/gay or live-in relationships), where a partner may believe that they have a claim against the owner of the property. Such claims will fail against Family Trusts, because the ownership of the property has been transferred. The Trustees are, from the moment of that transfer,  to be regarded as the new owners, with different rights and obligations from the previous owner.

We should also mention the naming of a Trust in an older parent's Will. This is quite often done to ensure the long term security of the Assets for a child of  such a Testator. In such cases, the transfer of the Asset will take place automatically, on the death of the parent, to their Trust instead of to their child. Provided that the child has been named as a Beneficiary of the Asset or Estate, it will receive the benefit.

Where  nominated children have children of their own, it may also be a suitable way for  Asset to be transferred. It will mean such children  do not have to start a new Forgiveness of Debt procedure of of their own, and therefore cause financial exposure to them for a number of years. The Asset is safe because it can be kept for the grandchildren of a Testator as well. In such cases children of a Settlor may use the Asset during their lifetime, but they may not dispose of it !

Where a child has large debts or risks or other claims against them a Trust can provide an outcome.

Then it is essential to safeguard the family of that child by making a transfer of Assets to a  Family Trust of  such a child. This  transfer to a Trust can be done during the lifetime of a parent, or once that parent has passed away by means of a Will.

For those who are getting married or who live together, and when they have children from previous relationships or marriages.

A Family Trust can be the solution to safeguard their own respective interests and  also the interests of their separate families, especially their own children. Family Trusts  do this most effectively by having a separate Trust for each of the partners and their children. Two Trusts can also work together as partners in owning Joint Assets, such as a jointly owned  residential or rental property. Separate Assets, belonging to each individual, can be placed in their own respective Trust for that particular partner/spouse and his/her natural family. Such assets can be investments, term deposits, a separate house etc.

When married couples have divested their entire interest to a Family Trust, they will want to know whether the trust fund will be subject to provisions of a Matrimonial Property  Law nature,  when subsequent to their divestment, the marriage or relationship fails.

Without a Family Trust a Separation Agreement is usually indicated. When a Trust is in place, reaching an agreement is much simpler and without the strict code for distributions. It is presumed that in most cases, parties will have an equal interest in dividing the trust fund. It is then much simpler and less stressful for the partners who are splitting up to change their lives according to their new circumstances. The previously recorded documents such as Deed of Trust, Memorandum of Wishes should therefore already make reference as to what should happen, if there is a split-up in the future.  It will thus safeguard the interests of the parents and  also their children. This should be done when a Trust is set up.  It will even allow you to set aside personal or family Assets, which you may wish to keep separate, and  out of ownership or control of other beneficiaries such as your spouse or step-children. This is often  a matter of concern in a second marriage or relationship. It is obvious that such parents will  often want to retain strong ties with their children. The intention is then to safeguard their entitlements or to a to specific Asset or a fixed percentage of an Estate or  Trust fund.

A new development in this field of law is known as : "Trust-busting".  Clients' affairs should be viewed with great caution as to how they can be affected, now and possibly in the future. 

Contact us to discuss your family trust requirements.
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