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 therefore, trusts may 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 needs both technical and specialist attention. Broadly speaking, a trust will be considered a nuptial trust if its existence 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.
Even if the court takes the view that a trust is not a nuptial one, 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 when considering how to allocate the matrimonial pot. In this way, an adjustment can be made to the non-trust assets to take account of the fact that the assets within the trust cannot be altered. This is known as “offsetting”.
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, seeking to protect pre-acquired or inherited wealth through pre-nuptial agreements, advising you at the point of marital breakdown or separately advising trustees who may have been joined in the divorce proceedings or served with a list of questions to assist with the divorce process. We also work closely where necessary with our Wills Trusts and Tax team in dealing with the more complex trust issues.