Separating from a partner is never easy, especially when you’ve both brought different financial contributions into the relationship. A recent Supreme Court decision, Lassnig v Zhou [2025] NZSC 116, provides important guidance on how trust assets may be divided when a short relationship ends.

What happened in this case?

Mr Lassnig and Ms Zhou married later in life after a brief relationship. They set up the Lassnig Family Trust together and bought three properties through it, planning to use them for retirement.

Both contributed financially, but Ms Zhou contributed far more (over 80%). Their non-financial contributions (like running the household) were equal, and they had no children together.

The marriage lasted less than three years. When it ended, the couple agreed each would get back what they had originally put in, but they disagreed about how to divide the extra equity that had built up due to capital gains.

The dispute went through several courts before reaching the Supreme Court:

• ‍Family Court: ordered an equal division of the trust’s net assets. The Judge emphasised that both parties had contributed to the relationship in different but equally important ways.
• ‍High Court: changed the split to 60/40 in Ms Zhou’s favour, recognising her larger financial input but still giving some weight to the equal non-financial contributions (read decision here).
• ‍Court of Appeal: went further, ordering an 80/20 split for Ms Zhou, reflecting the significant difference in financial contributions (read decision here).‍
• Supreme Court: agreed with the final 80/20 outcome but clarified that the Court of Appeal had reached it by applying the wrong reasoning.

The legal question

The key legal issue was how section 182 of the Family Proceedings Act 1980 should be applied. This section allows the courts to resettle trust property when a marriage ends, to reflect what the trust was originally set up to achieve.

Traditionally, the courts have used a three-step approach known as the Preston test. The second step considers the difference between the parties’ positions at separation and what their positions would have been if the marriage had continued.

The Court of Appeal applied this test and gave significant weight to the difference in the parties’ contributions at the second step. The Supreme Court, however, found that the Court of Appeal had misapplied the test:

• Step two should focus on the longer-term purpose of the trust, not just short-to-medium term outcomes.
• Differences in contributions should be weighed at the third step, where the Court exercises discretion about what order to make.

Despite this technical correction, the Supreme Court still reached the same practical outcome: an 80/20 split in Ms Zhou’s favour.

Why financial contributions mattered

The Supreme Court was clear that in short marriages without children, financial contributions will carry greater weight.

In this case:

• Ms Zhou contributed 81.25% of the trust funds.
• Mr Lassnig contributed 18.75%.
• Capital gains during the marriage did not override these initial contributions.

The Court rejected Mr Lassnig’s argument that the source of the funds didn’t matter because inflation caused the increase in value. Instead, it held that an award under section 182 must reflect where the funds came from in the first place.

Why this matters for you

This decision provides greater certainty for people entering relationships later in life, or where trusts are set up for retirement planning rather than supporting a family unit.

Key legal takeaways

• Section 182 is different from the Property (Relationships) Act. It is not about equal sharing, but about addressing the failure of the trust’s purpose.
• In short relationships without children, the courts will place more emphasis on financial contributions.
• The Preston test remains important, but the Supreme Court has clarified how it should be applied.
• Each case depends on its facts and the outcome could be different if children or other countervailing factors are involved.

How this decision can guide your planning

• Be clear about your trust’s purpose. Is it for retirement, family support, or something else?
• Document contributions. Keep good records of what each partner contributes, financially and non-financially.
• Think about agreements. If you and your partner bring different resources to the relationship, consider a written agreement about how gains should be divided if the relationship ends.

Need advice?

If you’re considering setting up a family trust, or are separating and unsure how your trust might be affected, our team of experts can help. Get in touch with us for a confidential conversation.

Thanks to Law Clerk, Prajna Sundar, for her assistance with the preparation of this article.