Can a husband or wife claim money from a Trust in a divorce financial settlement?
When it comes to making a claim against a Trust fund in divorce and financial settlement court proceedings, divorcees need help from the top London divorce and financial settlement solicitors as Trusts are complex and often misunderstood assets in divorce proceedings.
When solicitors are asked if a claim can be made by a husband or wife against a Trust fund within divorce and financial court proceedings the answer by the best London divorce and financial settlement solicitors is normally yes, but with provisos and qualifications such as the nature of the Trust fund, the classes of beneficiaries and the history of distributions from the Trust fund to the spouse.
In some family situations if a spouse cannot make a claim against a Trust fund there are few other family assets to pursue a divorce and financial settlement court claim against. That is why it is so important to get early expert legal advice from the best London divorce and financial settlement solicitors so that you know your legal options, including what powers the divorce and financial court has to make orders in relation to Trusts and the likely orders the court may make in your particular family and financial circumstances.
Why set up a Trust?
Most of us know that most Trusts are set up by settlors anxious to protect future generations of their family and to safeguard property and to keep family money “within the family”. Settlors can either just be naturally cautious or know from bitter family experience how a spendthrift, a bankruptcy or a divorce can reduce the legacy of family money available for future family generations. Sometimes money is not just placed into a Trust fund to protect family money but because it makes prudent financial sense to do so as part of an estate planning and tax strategy.
What is a nuptial settlement Trust?
From a top London divorce and financial settlement solicitor’s perspective it is really important to establish if a Trust is a nuptial settlement or not. That involves examining the Trust paperwork.
It is vital to ascertain if the Trust is a nuptial settlement because the nature of the Trust effects what orders the divorce court can make in relation to the Trust and its funds. If the Trust is a nuptial settlement then it is capable of variation by the divorce and financial settlement court. In other words, a nuptial Trust is more capable of being “attacked” in divorce and financial settlement proceedings than other forms or types of Trusts. That is good news for the applicant husband or wife.
What orders can a court make over a nuptial Trust on divorce?
If the court decides that the Trust is nuptial then the court has very wide ranging powers. The court can make orders to:
- change the Trustees and appoint new ones; and
- transfer monies out of the Trust; and
- Change who benefits from the Trust.
When top London divorce and financial settlement solicitors and the courts in the divorce financial settlement consider Trusts and their relevance to the financial settlement, they consider a range of factors including:
- The powers given to the Trustees; and
- The Trust documentation; and
- Whether there is a prenuptial agreement or postnuptial agreement in place and its terms; and
- The extent to which the Trustees have in the past exercised their discretion in favour of the spouse. For example, if prior to the separation or divorce there was a pattern of the Trustees paying out income or capital whenever any requests were made by the spouse beneficiary the then the courts will be quicker to infer that the Trust resources might be available in the future to the beneficiary spouse. That is why it is vital that not only the beneficiary spouse but also the Trustees take early expert advice from the best London divorce and financial settlement solicitors about the impact of capital distributions and income payments to the beneficiary spouse on any financial award in the divorce and financial settlement proceedings.
What orders can be made in divorce and financial settlement proceedings in relation to a non-nuptial Trust?
The best London divorce and financial settlement solicitors would still caution that even If the Trust is not a nuptial settlement a divorce financial settlement claim can still be made against the Trust provided that it can be established that:
- The Trust resources are a financial resource for one party to the marriage; and
- The other spouse either needs a greater share of the non-Trust assets or alternatively money from the Trust to meet his or her needs.
If the Trust is non-nuptial then the Court can still take the Trust into account and could, for example, award the other spouse a greater share of the non-Trust assets if it is necessary in order to meet the spouse’s needs.
It is therefore important to establish, through full financial disclosure, exactly what other assets there are, for example the amount of equity in the family home or the amount of savings and investments. When considering whether one spouse needs a greater share or all the non-Trustor money from the Trust the family court will assess “needs” partially on the standard of living enjoyed by the family during the marriage. Accordingly the higher the standard of living the greater the “need” for the purposes of a financial claim in divorce and financial settlement proceedings.
What happens if the Trust is overseas?
If a Trust is offshore and based in a different court jurisdiction then specialist advice should be taken from a top London divorce and financial settlement solicitor. They will work in conjunctions with overseas solicitors to look at the potential jurisdictions within which to start divorce and financial settlement court proceedings and whether starting court proceedings in the UK works to a spouse’s advantage.
There can be practical and tactical problems in enforcing orders against Trusts that are based outside of the UK as the English courts have limited jurisdiction overseas. That is why the best London divorce and financial settlement solicitors work with specialist overseas divorce and financial settlement solicitors to make sure that seamless expert advice is provided to either protect spouse beneficiaries of Trusts or to proactively pursue Trusts and relevant financial disclosure to make sure that the spouse who is not a beneficiary of the Trust receives a financial settlement that truly reflects his or her needs.
OTS Solicitors advise on all aspects of divorce and financial settlement law and have experience in divorce and financial settlement cases involving Trusts and complex assets. OTS Solicitors provide specialist divorce, family and children law advice especially where there are international elements. Please get in touch with us on 0203 959 9123 to arrange an appointment to speak to one of our experienced divorce and financial settlement solicitors.