Trusts are frequently used as a tax efficient method of protecting wealth for future generations. Upon divorce, if a trust is found to be nuptial, the court has the power to alter it so that an equitable financial settlement can be reached. Once a trust is said to be nuptial, the court must decide whether it should be viewed as a financial resource. To determine this, the court will examine the type of trust and whether its contents are readily available. If a trust is not found to be nuptial, the court will not have the power to include its contents in a financial settlement; however, the court may view the trust as a notional resource of the beneficiary spouse, meaning that whilst it may not be shared, its availability to one spouse will be considered.
The court’s powers can have grave consequences and therefore settlors setting up a trust should seriously consider what protection should be put in place to avoid any unwanted court intervention. Our family team frequently work together with our private client lawyers to draft pre/post-nuptial agreements that set out clearly the intentions of both spouses.
Dealing with trusts upon divorce can be extremely complicated and specialist advice is a must. Our family and private client team will work closely with accountants and financial advisers to ensure that you achieve a fair and commercial financial settlement on divorce.