When couples set up a family trust during their relationship, the big question on separation is: what happens to those trust assets? The Supreme Court has just addressed this in Lassnig v Zhou [2025] NZSC 116, a case that turned on contributions, expectations, and a marriage that lasted less than three years.
Background
- The couple married in 2012, separated in 2015, and set up the Lassnig Family Trust shortly after their wedding.
- The Trust owned three properties, funded by both parties’ loans and mortgages.
- Ms Zhou’s contributions (around $1.2m) far outweighed Mr Lassnig’s (around $188k).
- Both were trustees and beneficiaries, and the Trust was clearly for their joint benefit.
When the marriage ended, Ms Zhou sought resettlement of the Trust under s 182 of the Family Proceedings Act 1980.
Issues for Determination
Section 182 allows the Court to vary a nuptial settlement (such as a trust) when a marriage or civil union ends. The purpose is to adjust the trust so neither party unfairly benefits once the foundation of a “continuing marriage” has collapsed.
The key question for the Court was:
In a short marriage, with vastly unequal contributions and no dependent children, how should the trust assets be divided?
How the Courts Decided
- Family Court – ordered a 50/50 split after repayment of loans.
- High Court – adjusted to a 60/40 split in favour of Ms Zhou.
- Court of Appeal – went further, awarding 80% to Ms Zhou, 20% to Mr Lassnig, reflecting their actual contributions.
- Supreme Court – upheld the 80/20 split, confirming that in short marriages with no children, financial contributions will usually carry the most weight.
What This Means for You
- Short marriages are treated differently – Courts will not default to a 50/50 split if the marriage was brief and contributions were unequal.
- Financial contributions matter – If one partner has put in substantially more (for example, from pre-existing assets or trusts), that will likely determine the division.
- Non-financial contributions are still relevant – but in the absence of children or other counter-balancing factors, they won’t override major financial disparities.
- Trusts are not immune – Just because assets are in a trust does not mean they are protected from adjustment under s 182.
Our Perspective
At PK Law, we regularly advise clients who want to set up trusts to protect family assets, or are unwinding a trust after separation.
This case is a timely reminder that:
- The Court’s focus is on fairness when the “marriage premise” fails.
- Trust structures can be reshaped if they no longer reflect reality.
- Careful planning (and legal advice at the time of settlement) can make all the difference.
Key takeaway: In short marriages without children, expect trust property to be divided broadly in line with the respective contributions of the parties.
