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Approach to Trust Assets

When considering the division of assets and financial claims on divorce, the court is told it must look at all the circumstances of the case, including “…the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future…”.

In some cases, trusts may therefore be highly relevant.

In certain circumstances the court has the power to vary the terms of a trust to make financial provision for one of the married couple or for the children of the family.  In order to make such an order for variation, the court must be satisfied that the trust in question is a nuptial settlement - either ante-nuptial or post-nuptial.  The question of whether a trust is a nuptial settlement or not is often extremely complicated and technical and needs careful, specialist attention.  Broadly speaking, a trust will be considered a nuptial trust if it is for the benefit of one or both of the married couple and if it was created because of, or with reference to, the marriage.  The application of this definition can be complex in practice, particularly when a trust has a long history of supplemental deeds and has had a detailed life of its own.

Even if the court does not take the view that a trust is a nuptial trust, it can still take the existence and value of the trust into account as one of the 'resources' of the husband, wife or civil partner if appropriate when considering how to allocate the matrimonial pot.  In this way, an adjustment can be made to the non-trust assets, if appropriate, to take account of the fact that the assets within the trust cannot be altered.

The treatment of trusts can be a point of very great importance in cases where there are significant trust assets at stake. We can offer advice on all aspects of trusts, be it advising on the creation of trusts to seek to protect pre-acquired or inherited wealth, advising you at the point of marital breakdown or advising trustees who may have been joined to proceedings or served with a list of questions to assist the divorce process. We also work closely where necessary with our Private Client department.