This isn't directly tax but everyone has been asking about it. It contains big changes to de facto property . The Labour/Alliance conceded today that it would have to go to a Select Committee but there is only a 2 month report-back.

BILLS DIGEST

MATRIMONIAL PROPERTY AMENDMENT BILL 1998 SUPPLEMENTARY ORDER PAPER, 2000 No. 25

Date of Introduction: 16 May

Bills Digest No. 647

NEW ZEALAND PARLIAMENTARY LIBRARY Bills Digest No. 647

Published by the Parliamentary Library Parliament Buildings, Wellington New Zealand.

23 May 2000

Prepared by John McSoriley BA LL.B Legislative Analyst (Bills Digest Service) Ph. (04) 471-9626 (Ext. 9626) Fax (04) 471-1250

Caution

This Digest was prepared to assist consideration of the Bill by members of Parliament. It has no official status.

Although every effort has been made to ensure accuracy, it should not be taken as a complete or authoritative guide to the Bill. Other sources should be consulted to determine the subsequent official status of the Bill.

Copyright

© NZ Parliamentary Library, 2000.

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MATRIMONIAL PROPERTY AMENDMENT BILL 1998 SUPPLEMENTARY ORDER PAPER 2000 No. 25

Date of introduction: 16 May 2000

Portfolio: Justice

Select Committee: As at 23 May, not to be referred to a Select Committee

PURPOSE

The aim of the Supplementary Order Paper (the SOP) is to:

* extend the provisions of the Matrimonial Property Act 1976 (the Act) to apply to de facto partners including same sex partners, who have lived together for at least three years; * address the issue of economic disadvantage suffered by a non-career partner when a relationship ends; * provide that all relationship property is to be divided equally between the partners unless there are extraordinary circumstances which would make it unjust to require it; * extend the provisions of the Administration Act 1969 so that a de facto partner (including a same sex partner) is entitled to a share in the estate where the partners have lived together for 3 years; * extend the provisions of the Family Proceedings Act 1980 relating to spousal maintenance * to address problems of economic disadvantage suffered by non-career spouses when a marriage breaks up; * to extend those provisions to apply to de facto partners (including same sex partners) who have lived in a de facto relationship for at least three years (or for a shorter period in certain circumstances); * to amend the Family Protection Act 1955 to give de facto partners (including same-sex partners) who have lived in a de facto relationship for at least three years (or for a shorter period in certain circumstances) the right to make a claim against the estate of a deceased partner.

BACKGROUND

The Matrimonial Property Amendment Bill 1998 was introduced on 24 March 1998. It proposed to make certain amendments to the law relating to matrimonial property. At the same time the De Facto Relations Property Bill 1998 was introduced. Both Bills were referred to a Select Committee. The Matrimonial Property Amendment Bill 1998 was reported back to the House on 15 September 1999. The Bills Digests which discussed these Bills are Nos 379, 609, and 380.

The present system relating to matrimonial property The Matrimonial Property Act 1976 is a code governing the property rights of married people.

Rules for division of matrimonial property Under the Act all matrimonial property is subject to a presumption of equal sharing. In relation to the matrimonial home and family chattels, the presumption can be displaced by the Court where there are extraordinary circumstances rendering equal sharing repugnant to justice. In relation to the balance of the matrimonial property, the presumption of equal-sharing can be displaced by the Court where the contribution of one spouse to the marriage partnership has been clearly greater than the other. Where the equal sharing presumption is displaced, the property in question is divided on the basis of the contribution of each spouse to the marriage partnership.

Types of matrimonial property Subject to the above general rules, three types of property are contemplated by the Act:

(1) The family home and family chattels These are all basically matrimonial property regardless of who actually paid for them. The general rule is that these must be divided equally unless the circumstances in the marriage were such that an equal division would be totally unfair to one of the partners. (2) Matrimonial property additional to the family home Any business used to produce family income and any savings and investments made out of family income are also considered matrimonial property and must be divided equally unless justice demands otherwise. (3) Separate property Property which existed before the marriage and which was kept separate during the marriage is not considered matrimonial property and does not have to be divided. Different rules apply for marriages of short duration (i.e. less than three years). Generally property brought into the marriage by one party to such a marriage may be taken out again by that party when the marriage ends. Only those things brought into the marriage from joint resources need to be divided and unequal contributions may, in this context, be taken into account.

Marriages ended by death At present the 1976 Act applies only to marriages which end during the lives of the two spouses. For marriages terminated by death where testamentary disposition for the survivor is considered by that person to be inadequate, an application to the Court under the Matrimonial Property Act 1963 must be made for a further share. The 1963 Act continues in force for this particular purpose. However the 1963 Act, unlike the 1976 Act, does not provide for equal sharing of matrimonial property but gives the courts a broad discretion to determine the surviving spouse's share. In consequence, there is potential for a person whose spouse has died to be worse off in property terms than one whose marriage has broken down.

The Bill as introduced The Bill as introduced provides as follows:

* The coverage of the Matrimonial Property Act 1976 is extended to marriages ended by the death of a spouse; * The Family Court (the Court) is given sole originating jurisdiction under the Act; * Assistance is given to custodial parents by giving the Court greater powers to postpone the sharing of property where there are minor dependent children if this is necessary to avoid undue hardship for the custodial parent; * The Court is expressly empowered to take account of contributions made after the marriage ends, such as contributions to matrimonial property or care provided to the children of the marriage. Account can also be taken of the dissipation of matrimonial property by a spouse; * There is greater power, where there has been a disposition of matrimonial property to a trust or company that has the effect of defeating the interests of one spouse, for the courts to make financial adjustments to achieve the intent of the 1976 Act, although third party interests are protected.

The recommendations of the Select Committee In its report presented on 15 September 1999, the Government Administration Select Committee recommended that the Bill be amended. The recommended amendments, which relate to definitions of matrimonial property and separate property are described in Bills Digest No. 609.

Enhanced earning capacity and projected future earnings A description of the law relating to this issue is contained in Bills Digest No. 379.

MAIN CHANGES TO THE BILL

Extension to de facto partners

Renaming of the Bill The Matrimonial Property Act is renamed the Property (Relationships) Act (New Clause 2 (a))

Definition of "de facto relationship" and new terms A number of new terms are placed in the Bill to reflect the intention of the SOP to cover de facto relationships. The term "de facto relationship" is defined as a relationship where two people (both of the same gender or both of different genders) are living together in a "relationship in the nature of marriage", although not married to each other. The term "partner" replaces the terms "spouse", "husband" and "wife". The term "partnership relationship" replaces existing references to "marriage" and means a marriage or de facto relationship. The term "relationship property" replaces the term "matrimonial property". The term "family home" replaces existing references to "matrimonial home" (New Clause 3A, New Section 2).

Relationships of short duration The term "relationship of short duration" will replace the term "marriage of short duration" and means either a marriage or a de facto relationship where the partners have lived together for less than three years and includes both where the marriage immediately follows the de facto relationship (New Clause 3A, New Section 2B).

Property where a relationship of short duration is a de facto relationship The SOP provides that an order cannot be made under the Act for the division of relationship property if a de facto relationship is a relationship of short duration. There is an exception to this rule where the Court is satisfied that there is a child of the relationship, or that the applicant has made a substantial contribution to the partnership relationship, and (in either case) that failure to make an order under the Act would result in serious injustice. Then the Court may award each partner a share of the relationship property, based on the contribution of each partner to the partnership relationship (New Clause 11B, New Section 14A).

Application of legislation to de facto relationships The SOP applies the Bill to de facto relationships whenever they began but will not apply to de facto relationships that end before the legislation comes into effect on 1 June 2001 (New Clause 5, New Section 4C).

Amendments to address economic disparities

Economic disparity because of the division of functions in a relationship The SOP empowers the Court to order one partner to pay a sum of money to the other partner out of the first partner's relationship property, if the Court is satisfied that, after the partnership relationship ends, the income and living standards of the other partner are likely to be significantly higher than those of the other partner because of the effects of the division of functions within the relationship while the partners were living together. In deciding whether or not to make an order, the Court may have regard to:

* the likely earning capacity of each partner; * the responsibilities of each partner for the ongoing daily care of any minor or dependent children of the relationship; * any other relevant circumstances (New Clause 11B, New Section 15).

Economic disparity because of actions of one partner The SOP empowers the Court to order one partner to pay a sum of money to the other partner, if the court is satisfied:

* that, after the relationship ends, the income and living standards of the first partner are likely to be significantly higher than the other partner because of the effects of the division of functions within the relationship while the partners were living together; and * that any increase in the value of the other partner's separate property was attributable, wholly or in part, and whether directly or indirectly, to the actions of that first partner while the partners were living together (New Clause 11B, New Section 15A). Single rule for division of property

Single rule for division of all relationship property On the division of relationship property each of the partners is entitled to share equally in the family home, the family chattels, and any other relationship property. However, if there are extraordinary circumstances that make equal sharing of the relationship property "repugnant to justice", the share of each partner in that property is to be determined in accordance with each partner's contribution to the partnership relationship. There are two exceptions:

* in the case of marriages of short duration the effects of the existing Sections 13 and 14 are retained; * in the case of de facto relationships of short duration, the share of each partner in the relationship property is determined in accordance with the contribution of each partner to the partnership relationship (New Clause 11B, New Sections 11, 13, 14, 14A).

Contracting out of the Act

More stringent test In relation to contracting out, the SOP provides a more stringent test for the Court to administer in deciding whether a contracting out agreement (sometimes called a "pre-nuptial agreement") should be set aside. At present the Court can set such an agreement aside if it is satisfied that it would be unjust to give effect to the agreement.

The SOP provides that a Court would be able to set an agreement aside if, having regard to all the circumstances, it is satisfied that giving effect to the agreement would cause serious injustice (Clause 22, New Part 6, Section 21I).

Earlier commencement The part of the SOP relating to contracting out comes into force on 1 January 2001 (instead of 1 June 2001 which is when the rest of the Bill comes into force). This is to allow people to enter into contracting out agreements before the rest of the provisions apply (Clause 22, Part 6, New Section 21S).

Administration Act 1969

Surviving de facto partner has same rights as a surviving spouse A surviving de facto partner of an intestate (i.e. a person who has died without leaving a will), where the partners have lived in a de facto relationship (including same-sex), is entitled in the same circumstances, and to the same extent, as an intestate's husband or wife. This does not apply where the de facto relationship is one of short duration (i.e. less than 3 years) unless the Court is satisfied that:

* there is a child of the relationship and not being able to succeed on the intestacy would result in serious injustice to the partner; or * the partner has made a substantial contribution to the partnership relationship and not being able to succeed on the intestacy would result in serious injustice to the partner (Clause 64, New Sections 77B and 77C).

Where an intestate leaves a spouse and one or several partners If the intestate leaves more than one partner who is entitled to succeed (i.e. inherit) (whether the partners are from a marriage and/or a de facto relationship), the estate is distributed according to particular rules. The SOP provides that the estate must be distributed or held on trust as if the intestate died leaving only one partner (and any children or other relatives). That one partner's share is then divided equally amongst the surviving partner and all previous partners entitled to succeed (New Clause 64, New Section 77C).

Comment This means that the surviving partner and survivors who were in a partnership relationship with the intestate and who are entitled to succeed are only, as of right, entitled to the portion of the estate to which one surviving spouse or de facto partner would be entitled and the entitlement of others to shares in the estate is not diminished by the intestate having more than one surviving spouse or partner.

Family Proceedings Act 1980

Maintenance during marriage The Court may take into account a wider range of circumstances in determining the reasonable needs of the parties in order to decide whether or not to make a maintenance order:

* the ability of the parties to be or to become self-supporting, having regard to: 1. the effects of the division of functions within the marriage while the parties are living together or lived together; 2. the likely earning capacity of each party; 3. any other relevant circumstances; * the responsibilities of each party for the ongoing daily care of any minor or dependent children of the marriage after the parties ceased to live together; * the standard of living of the parties while they are living together or lived together; * any physical or mental disability; * any inability of a party to obtain work that: 1. is reasonable in all the circumstances for that party to do; and 2. is adequate to provide for that party; * the undertaking by a party of a reasonable period of education or training designed to increase that party's earning capacity or to reduce or eliminate that party's need for maintenance from the other party, where it would be unfair, in all the circumstances, for the reasonable needs of the party undertaking that education or training to be met immediately by that party: 1. because the effects of any of the matters set out above on the potential earning capacity of that party; or 2. because that party had previously maintained or contributed to the maintenance of the other party during a period of education or training (New Clause 75, New Section 63).

Maintenance after dissolution of marriage or end of de facto relationship The Court may take into account a wider range of circumstances in determining the reasonable needs of the parties in order to decide whether or not to make a maintenance order. The test is identical to that in New Section 63 (except that the Court is not required to consider the circumstances of physical or mental disability of a partner nor the circumstance of inability to find work) as set out immediately above (New Clause 75, New Section 64).

Period of spousal maintenance Under the present law spousal maintenance is subject to the obligation that a party must assume responsibility for his or her own needs within a reasonable time subject to certain circumstances relating to the ages of the parties and the duration of the marriage which make it unreasonable to require the party to do without maintenance and which make it reasonable for the other party to continue to provide it. The SOP provides that a new circumstance must be considered. This is the ability of the partners to become self-supporting. In determining this, the Court must have regard to:

* the effects of the division of functions within the partnership relationship while the partners were living together; * the likely earning capacity of each partner; * the responsibilities of each partner for the ongoing daily care of any minor or dependent children of the relationship after the partners ceased to live together or after the dissolution of the marriage; and * any other relevant circumstances (New Clause 75, New Section 64A).

Assessment of the maintenance payable The SOP changes the matters that the Court is to have regard to in making an assessment of the maintenance to be paid. The matters to be considered are:

* in considering potential earning capacity, the Court must have regard to the effects of the division of functions within the partnership relationship while the partners were living together; * in considering the reasonable needs of each partner, the Court may have regard to the standard of living while they were living together (New Clause 75, new Section 65).

Comment The present requirement that a person cannot be required to pay by way of maintenance any amount which would have the effect of depriving that person, or any dependant person ordinarily resident with that person, of a reasonable standard of living is removed.

Maintenance to de facto partners The provisions of the Family Proceedings Act 1980 are generally extended to de facto (including same sex) partners who have lived in a de facto relationship for at least three years. The Court may grant maintenance to de facto partners where the relationship has existed for at least three years. However, the Court may grant maintenance even though the relationship was for a shorter period, if it is satisfied that there is a child of the relationship, or that the partner seeking the order had made a substantial contribution to the partnership relationship, and (in either case) that failure to make the order would result in serious injustice to that partner (New Clause 76, New Section 70B).

Family Protection Act 1953

De facto partners may make claims The SOP provides that de facto partners (including same sex partners) who have lived in a de facto relationship for at least 3 years have the right to make a claim against the estate of a deceased partner. This would only apply to the estates of persons who die on or after 1 June 2001 (New Clause 88, amendments to Section 3(1) of the Family Protection Act 1953).

Court may make an order where there is a relationship of short duration The Court may make an order in favour of a partner who was living in a de facto relationship of short duration with the deceased, if it is satisfied that there is a child of the relationship, or that the partner seeking the order had made a substantial contribution to the partnership relationship, and (in either case) that failure to make the order would result in serious injustice to that partner (New Clause 76, New Section 70B).

© NZ Parliamentary Library, 2000.

**************************************************************** Annabel Young MP National Party Spokesperson for Revenue Electorate Responsibility for Wellington Central and Rongotai http:/www.national.org.nz Have you had a look at http://www.tax.org.nz

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