Trusts & Divorce
Divorce is a difficult time for the couple involved, but professionally it can also be a demanding time for the trustees of trusts that hold assets which are at risk of being taken into account indirectly and, in certain circumstances, attacked directly, as a result of the divorce and financial remedy process.
The English and Welsh Courts have wide powers to order the variation of any settlement that has a 'nuptial' element. Even if a settlement does not have a 'nuptial' element, the English Court can still take it into account as a 'resource' where one of the divorcing parties has an interest in it.
If you are a trustee of a trust where either the Settlor or one of the Beneficiaries is involved in a divorce and the resulting financial remedy process you may need to take specialist independent advice. There will be important issues of disclosure and confidentiality to consider: you will need to consider what is in the best interests of all the beneficiaries, not just the one who is getting divorced.
At an early stage, offshore trustees will need to consider whether or not to submit to the jurisdiction of the English courts or whether to avail themselves of local 'firewall' legislation to help to protect the trust. What should trustees do when joined to English financial remedy proceedings? If you are an offshore trustee, you should take advice both locally and in England.
But advising offshore trustees on protecting the trust assets from attack should not start when a beneficiary is getting divorced: it should start before the beneficiary is even married with a review of the way in which the trust is drafted.
- Should the trust language be modified so as to strengthen the trustees' hand in the event of a divorce?
- Can the beneficiaries be encouraged to enter into pre-nuptial or post-nuptial agreements under the terms of the trust?
- If the trust is particularly large, should it be segregated so as to protect some of the assets?
- Has sufficient thought been given to the drafting of any Letters of wishes?
Our Private Client and Family law specialists are well-placed to advise both professional and lay trustees, onshore and offshore, on their duties and responsibilities.
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