Trust Issues

When it comes to family trusts, it is usually the beneficiaries of the trust who get all the attention, but it is the role of the trustees that interest me.

Trustees have a somewhat strange and difficult job - they own the assets held on trust but they hold them for the benefit of beneficiaries, and so have a duty to act in those beneficiaries' best interests. The trustees can control and manage the assets but only within the parameters of the trust.

In circumstances where one of the beneficiaries is getting divorced, the trustees' job becomes ever more difficult and complicated, particularly if there are contested financial remedy proceedings.

In the event of a divorce, the court will only interfere with a trust to the extent that it is necessary to do justice between the parties, and will be very slow to deprive innocent third parties of their rights under the settlement.

The first 2 questions that the court must answer in relation to the trust are:

Is the trust a nuptial settlement (which means that it makes continuing provision for both or either parties to the marriage)? If so, the court will have wide ranging powers to vary the terms of the trust on divorce. Are the trust assets a resource available to one party of the marriage, which can be taken into account when determining an appropriate financial settlement? The court will look to the trustees to help them to answer those questions. The trustees must have in mind the interests of all the various beneficiaries to the trust, some of whom may be parties to the marriage, children of the marriage, or entirely unrelated to the marriage.

The trustees may become...