Preserving family wealth is uppermost in many families’ minds. Therefore, knowing how structures created to hold family wealth will perform in the event of a family member divorcing is crucial.
Unfortunately, the treatment of trusts on a beneficiary divorcing is to some extent uncertain. The legislation is clear enough: anyone with an irrevocable, fixed interest in a trust (e.g. life tenant/capital remainderman) can have their interest transferred to their spouse or child in the event of a divorce or separation. The terms of ‘nuptial settlements’, be they discretionary or fixed interest, can also be varied to permit a spouse and/or children to benefit. Therefore, trusts that want to remain outside the divorce courts will take care not to be regarded as nuptial settlements.