An application to vary a trust should not therefore be made until advice about the enforcement of such an order has been taken. The issue of the enforcement of such an order should however be at the forefront of an analysis of any potential claim, as if the trust is governed by the law of an offshore jurisdiction (such as Cayman, Bermuda, BVI, Jersey, Guernsey and others), most have legislation the object of which is to repel the enforcement of an English matrimonial order. The court has a significant power to vary the terms of a trust in order to provide a non-beneficiary spouse with money from the trust in financial remedy proceedings. When does the court have the power to vary a trust so that provision can be made for a spouse? That said, clients should also be aware that while trust assets may be a resource of one of the spouses, they may not be considered by the court to be marital assets to which the sharing principle applies. These cases are now rare as it is necessary to prove that both the settlor and the trustee had the dishonest intention of creating a piece of paper (the trust deed) in order to pretend to third parties (often creditors, the taxman, or a spouse) that the assets do not belong to the settlor, but to the trustee who holds them on the terms of the trust.Ĭlients should therefore be aware that whilst assets held in a trust of which one spouse or the other is a settlor or a beneficiary or both, are not held by, or owned by, that spouse, they could be brought into account on the division of marital assets on divorce. In such a case the court can strike the trust down as being a sham on the basis that the trust deed is no more than a pretence, and the trust assets never left the ownership of the settlor. If there was no intention to create the trust in the first place
In such a case the court has the power to vary the settlement by giving one spouse or the other, or both, a fixed interest in the trust assets, which has the effect of increasing the pot of assets which is split This is likely to happen if the Court takes the view that the trustees would be likely to distribute trust assets to the beneficiary spouse if he/she asked for a distribution If the court takes the view that trust assets are a resource which is available to a spouseĮven if the trust is a wholly discretionary trust such that no beneficiary has any entitlement to any assets under the terms of the trust, the court may treat a beneficiary spouse as having the trust assets, or some part of them, at his/her disposal such that they are included in the assets, which are available for division. Whatever the interest is, it will need to be identified, valued and taken into account they only arise on someone else’s death). If it is an income interest, the asset owned by the beneficiary spouse is limited to that income stream if it is a fixed capital interest, his/her asset extends to the capital to which he/she is entitled under that fixed interest. In such a case, that interest belongs to that spouse and is one of his/her assets which will be taken into account in the court’s division of assets. If one or other spouse has a fixed interest in the trust The ways in which trust assets might feature in that process are: Financial remedy claims on divorce involve the court in identifying the resources available to each spouse and performing a discretionary exercise in computing a percentage division of those available resources. The assumption by the settlors and beneficiaries of trusts is that as trust assets are not in their name, they will not be taken into account on divorce by the English court and as such can be ring fenced from the process. What is the most persistent myth when trust assets become an issue on divorce? So, if a trust is a feature in your situation read on and discover what you should be looking out for: trusts matter! One of those things is the thorny issue of trusts. She specialises in complex international trust disputes including spousal attacks on trust structures in financial relief proceedings on divorce.Īs with so many things in family law, other areas of law can and frequently do come into play. She is Legal 500s Private Client Trust and Probate Silk of the year 20 and won Barrister of the Year at the Citywealth Magic Circle Awards 2021. Elspeth is a specialist trust litigator who is described in the directories as “the smiling assassin” and “the human equivalent of a heat seeking missile”. This week Manders Law Managing Partner Mary-Ann Wright speaks to Elspeth Talbot Rice QC.
#Remoter issue trust series#
We continue our series of hot topics in family law.
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