The division of assets in high net worth divorce cases is often extremely contentious, with one side wanting to protect as much of their assets as possible, while the other looks to secure their fair share. There are also several factors to take into account, such as complex financial structures, limited companies, and multiple jurisdictions.
Another common element of divorce cases involving significant wealth is the presence of trusts. Whether they are onshore or offshore, these investment vehicles often hold a large proportion of the family’s assets.
Understanding the importance of trusts in high net worth divorce cases is crucial, as the success of attacking or defending a trust can have a significant impact on the final outcome. With this in mind, we delve into how trusts and divorce are linked, whether assets are automatically protected, and also outline the ways in which Lowry Legal’s experienced team can help.
Trusts and Divorce: How Does it Work?
There are a number of ways that trusts in high net worth divorce cases can be handled and assessed. If there is a dispute which needs to go to court, the judge will look at several factors to determine whether the assets will be divided or not.
Financial Resources & Nuptial Trusts
A spouse who does not have access to the trust can argue that it is a financial resource or a nuptial trust and should therefore be included in the division of assets. It is the job of the beneficiary’s legal team to argue that the funds should not be considered in the case.
When determining whether a trust is a financial resource, a court will look at a number of factors. A fixed trust, where a beneficial interest can be valued, is likely to be considered a divisible asset. The same is true in cases where the beneficiary receives regular income from the trust. In situations involving discretionary trusts, a court may decide that the beneficiary’s share of the assets can be divided if they are likely to receive income immediately or in the foreseeable future.
Nuptial trusts involve a connection between the assets within the trust and the relationship itself — such as ones containing the family home, or those which were set up in preparation for marriage. The court will assess several elements, such as the identities of the beneficiaries and settlor, when the trust was set up, and the expressed interests included in the letter of wishes, to decide whether the assets should be divided.
Onshore vs Offshore Trusts
How difficult it is to obtain disclosure of assets within trusts in high net worth divorce cases may depend on where it is located. For those based within England and Wales, the court can make a request to provide information which will need to be adhered to.
This is not the case for offshore trusts, which are common in cases involving significant wealth. While some international trustees may comply with the information request, others could ignore it entirely.
Are Assets in a Trust Protected From Divorce?
Assets in a trust are not automatically protected from divorce. A court will need to decide whether the trust is a financial resource or a nuptial trust, or if the trust was created to deliberately try to defeat a matrimonial claim. If any of these are found to be true, the funds will be considered as part of the divorce settlement.
It is the court’s responsibility to ensure that both parties achieve a fair outcome. It therefore needs to consider the financial assets of both parties, whether they’re available now or in the foreseeable future, when making its decision.
How is a Trust Divided in a Divorce?
If the court decides trust assets should be divided, it can issue an order which varies the trust so funds are made available to the non-beneficiary, or award the non-beneficiary a greater share of non-trust assets. The assets within a trust are therefore treated as either capital or income, depending on what the court feels is most appropriate.
Should the courts feel that trusts in high net worth divorce cases have been set up to deliberately frustrate a claim or avoid a full financial disclosure, it will take a much harsher stance. This is why it’s important to seek specialist legal advice when setting one up — to ensure it’s being done for the right reasons.
Can I Put My House in a Trust Before Divorce?
While you can put your house in a trust before divorce, it doesn’t automatically protect it from the final settlement. If the court feels the house is a matrimonial asset, it will be taken into account as part of the divorce order.
Lowry Legal: The High Net Worth Divorce Specialists
If you’re a person who has significant wealth, or are a spouse looking for their fair share of assets, you can rely on Lowry Legal to help. We have amassed a great deal of experience with navigating trusts in high net worth divorce cases, and have often proved instrumental in securing a positive result for our clients.
Our skilled team is also completely comfortable with handling complex divorce cases which span multiple jurisdictions around the world. Whatever your circumstances may be, you can rely on us to offer robust and reliable assistance. We always aim to achieve an amicable resolution in the first instance and understand how a more collaborative approach can help to reduce stress and costs. However, we will stand ready to vigorously defend your personal interests should court action be necessary.
Based in Manchester but serving the entirety of England and Wales, we provide a targeted yet holistic service. Our process begins by gaining a thorough understanding of your circumstances, goals and challenges, before recommending a solution that is tailor-made to achieve those objectives. We take care of everything from financial arrangements and mediation services to child abduction, and can even call on the expertise of third party professionals such as forensic accountants where necessary.
To find out more about Lowry Legal and how we can help, get in touch with our team today. We make it our mission to get our clients the best possible outcome and are ready to do the same for you.