The previous blogs in this series (part 1 and part 2) have given an introduction to trusts and the various issues that the Court will have to consider.
This blog will look at what the Court considers when, as in the majority of circumstances, the trust being dealt with in the context of divorce proceedings is genuine.
The Genuine Trust
Trusts can be set up for various genuine reasons, including to avoid or manage tax, to vest inherited assets, to protect wealth for generations to come, to give third parties beneficial interests in property or provide discretionary income or capital to a class or classes of beneficiaries.
If your spouse is a beneficiary under a trust then it would be relevant to consider what income or future capital they may receive as a result or what other benefit they are entitled to. The court will take this income, capital or other benefit into consideration when deciding what resources your spouse has available to him or her along with the extent to which the trust assets are available or will be available to them in the future.
Of course, the resources available to any beneficiary spouse under a trust will depend on the trust assets themselves along with the terms of the trust deed. As we mentioned in part 1 of this series of blogs, there are different types of trust set up for different purposes and they will contain different assets of varying value depending on the purpose of the trust. It is important that you obtain specialist legal advice in these circumstances so that a proper analysis of the trust deed your spouses entitlement to them can be made.
The Court has frequently said that it must look past the often complex structure of the trust itself to the reality of the situation and financial or other benefit received as a result of one spouse being the beneficiary of a trust.
The question that the Court will most often ask itself when determining the reality of the situation is would the trustees, if asked to do so by the beneficiary, advance all or the whole of the capital available in the trust immediately or in the foreseeable future.
If you believe that your spouse is a beneficiary under trust then it is important that the following are considered:-
- The drafting of the trust deed itself.
- Is your spouse the settlor of the trust (i.e. the person who has transferred assets to the trustees to for the trust assets)?
- Who the beneficiaries are and what interests do they have?
- The pattern of previous distribution of assets, including capital or income.
- The existence or contents of any letter of wishes dealing with the way the trustees exercise their duties and discretion under a discretionary trust.
If the Court can establish that the trust assets are available to the spouse who is a beneficiary, the Court may make orders that assume that the trust assets could be used to meet payments due under a Court order or that the beneficiary spouse will have their assets replenished by the assets of the trust if the order is made.
Emma Davies is a specialist Family Law Solicitor at Nelsons. If you need advice on trusts and divorce or any other family related matter, please contact Emma and she will be happy to discuss your circumstances in more detail and give you more information about the services that Nelsons family law solicitors can provide. Emma can be contacted on 0800 024 1976 or by email [email protected]