Legal News | 24.03.26
How Does The Family Court Treat Trusts In Divorce?
What is a trust?
A trust is a legal arrangement whereby one or more ‘trustees’ hold assets for the benefit of one or more ‘beneficiaries’ who are or may become entitled to receive some benefit from these assets. There are a range of different types of trusts, each with distinct powers for the trustees and subject to specific tax regimes.
Are assets in a trust protected from divorce?
A trust is primarily a mechanism for succession planning and wealth protection for future generations. However, there is a common misconception that assets held in a trust are fully protected in a divorce and cannot be considered by the Family Court. Many people ask: are assets in a trust protected in divorce? The answer is that the Family Court has broad powers and may take trust assets into account when ensuring fairness and reasonable needs are met.
The Family Court typically treats trusts in one of two main ways:
- Determining the trust assets as a financial resource of one or both spouses, or
- Less commonly, determining that the trust is a nuptial settlement that it is possible to vary.
When assessing whether a trust’s assets are a financial resource available to a spouse, the Court may consider factors such as:
- The nature and purpose of the trust;
- Whether the spouse is a beneficiary under the trust;
- The history of distributions;
- The overall value and liquidity of the trust;
- The impact on other beneficiaries; and
- The relationship between the spouse beneficiary and the trustees.
How can Wansbroughs help?
It is always advisable to have the trust deed and any letter of wishes carefully drafted by a professional. Our Private Client Team at wealth@wansbroughs.com can assist with the preparation of such documents.
We also work closely with our Family and Divorce Team at family@wansbroughs.com.
As the Family Court’s treatment of trusts in divorce is highly fact-dependent, we recommend seeking advice from our Family and Divorce Team at an early stage. This includes considering the option of a nuptial agreement, which can be signed before or after marriage and determines how assets should be divided in the event of divorce, including clarifying whether non-matrimonial trust assets are protected.
