Comprehensive guide to trusts and divorce or dissolution of a civil partnership

Divorce or dissolution of a civil partnership can be a challenging and emotionally taxing process, particularly when trusts are involved. Trusts are frequently used to manage and protect assets, adding complexity to divorce or dissolution financial settlements.

At Moore Barlow, we offer clear, comprehensive guidance to help you navigate the intersection of trusts and divorce or dissolution, ensuring your interests are safeguarded.

Understanding trusts in the context of divorce or dissolution of a civil partnership

A trust is a legal arrangement where one party, the trustee, holds and manages assets for the benefit of another party, the beneficiary. Trusts serve various purposes, such as managing wealth, providing for family members, and achieving specific financial goals. In the context of a divorce or dissolution of civil partnership, the presence of a trust complicates the division of assets due to the varying types and structures of trusts.

Types of trusts and their implications in divorce or dissolution of a civil partnership

Pre-marital trusts

Pre-marital trusts, established before marriage or entering into a civil partnership, are typically considered separate property. However, if these trusts benefit the spouse or children or are intertwined with marital finances, the court may consider them during the settlement process.

Discretionary trusts

Discretionary trusts give trustees discretion over distributions, which the court evaluates to determine the likelihood of future distributions to the beneficiary. Offshore trusts add an additional layer of complexity due to enforcement challenges that require cooperation from the jurisdiction where the trust is located.

The court’s approach to trust assets in divorce or dissolution of civil partnership

When dealing with trusts in a divorce or dissolution of a civil partnership, the court examines various factors to determine whether the trust assets should be included in the marital pot. The court assesses whether either spouse or civil partner has had access to or has benefited from the trust assets. If so, these assets may be considered part of the marital pot.

Full disclosure of trust documents, including the trust deed, letters of wishes, and financial statements, is required. This helps the court understand the purpose of the trust, the beneficiaries, and the extent of the assets.

The court also reviews the trust’s history, including its establishment and administration, and any patterns of distribution to the beneficiaries, which will then be considered alongside if any distributions were used for the benefit of the married couple or civil partners.

Strategies for protecting trust assets in divorce or dissolution of civil partnership

To safeguard trust assets during a divorce or civil partnership, it is essential to take proactive steps. Clarity in trust deeds is crucial; clearly define the trust’s purpose and beneficiaries, specifying that the trust is not intended to benefit the spouse or civil partner in the event of a divorce or dissolution of civil partnership.

Maintaining documentation that proves trust assets are separate property, especially for pre-marital trusts, can help demonstrate that these assets should not be included in the marital pot and to prove any monies received from them have not been mingled with joint property.

Periodic reviews of the trust with legal and financial advisors ensure that it remains compliant with current laws and continues to serve its intended purpose.

Legal considerations and case law

Trust can be complex and case law provides insight into how courts handle trusts in divorce or dissolution proceedings.

In Charman v. Charman (2007), the court included an offshore trust in the marital assets due to the husband’s control over the trust. This means the location of a trust does not prevent it from being included within the marital pot.

The Whaley v. Whaley (2011) case highlighted the importance of full disclosure and transparency in trust documentation. Disclosure is required to understand the extent of the trust, its purpose and whether it is relevant to the division of assets. These precedents are crucial for understanding how to navigate the complexities of trusts in divorce or dissolution of a civil partnership.

Offshore trusts: Challenges and solutions

Offshore trusts present unique challenges in divorce or dissolution proceedings due to enforcement issues that require cooperation from the offshore jurisdiction. Engaging with legal experts who have experience in the relevant offshore jurisdiction is crucial to understanding local laws and ensuring compliance.

Maintaining detailed records of the trust’s creation, administration, and distributions helps demonstrate the trust’s purpose and the beneficiaries’ rights, facilitating a smoother legal process.

Disclosure requirements and trustee involvement

Full disclosure of trust assets is required in divorce or dissolution proceedings. Non-disclosure can lead to legal penalties and adverse inferences by the court. Trustees may also be required to participate in the proceedings by providing documents and testifying about the trust’s administration and assets. In some cases, trustees can be added as parties to the proceedings that relate to the financial matters arising from a divorce to ensure a comprehensive evaluation of the trust.

How Moore Barlow can help

Navigating the complexities of trusts and divorce or dissolution requires specialised legal expertise. At Moore Barlow, we are committed to providing comprehensive, client-focused support to help you achieve a fair outcome. Our experienced solicitors guide you through every step, ensuring that your interests are protected and that you understand each phase of the process. Whether dealing with nuptial settlements, pre-marital trusts, or offshore trusts, our approach is tailored to your unique circumstances.

At Moore Barlow, we believe in building lasting relationships with our clients. We take the time to understand your individual situation and long-term goals. This personalised approach allows us to offer bespoke legal solutions that address both immediate needs and future aspirations. Our open and communicative culture ensures you are always informed and involved in the process.

We recognise that your immediate need is part of a larger picture, and we strive to provide solutions that consider the full context of your life. By doing so, we help you achieve long-term stability and success, whether you are managing a business or protecting your family’s interests.

Contact us

If you are facing a divorce or dissolution of a civil partnership involving trusts, contact us today to discuss your situation. Our team of expert divorce solicitors at Moore Barlow is ready to provide the support and guidance you need to navigate this complex process. Let us help you achieve the best possible outcome for your specific needs.