When navigating the complex financial aspects of divorce, one question arises time and again: can a trust protect an inheritance from your spouse? While a trust can provide a layer of protection, the answer is far from straightforward. At Arlingsworth Solicitors, we understand that every case is unique, and we’re here to help you understand how UK family law views trusts during divorce proceedings.

What Is a Trust, And Can It Shield Assets?

A trust is a separate legal entity that holds assets for the benefit of named beneficiaries. While neither spouse legally owns the trust’s assets, this doesn’t necessarily shield those assets from being considered during divorce.

UK courts have the power to examine the trust deed and how the trust has operated over time. If the court believes that one spouse is likely to benefit from the trust in the future, it may be considered inequitable to ignore it when dividing the matrimonial pot.

In short, a trust is not automatically ring-fenced from divorce proceedings.

Are Trusts Considered Matrimonial Property?

Whether a trust is considered part of the matrimonial pot depends on several key factors:

  • When and why the trust was established (before or during the marriage).
  • Whether one or both spouses benefit from the trust.
  • How the trust assets have been used: for example, if they funded the couple’s lifestyle.
  • How much control one spouse has over the trust.

Courts in England and Wales have wide discretion and look closely at whether the trust assets are intertwined with the couple’s finances. Every detail matters.

Types of Trusts and How They’re Treated in Divorce

Nuptial Trusts

Nuptial trusts are directly connected to the marriage – for example, if the couple set up a trust to benefit themselves or their children. Courts have the power to:

  • Vary the terms of the trust
  • Transfer trust assets to the non-beneficiary spouse
  • Appoint new trustees or change beneficiaries
  • Nuptial trusts are most at risk of being included in divorce settlements.

Intergenerational Trusts

Set up by earlier generations (such as grandparents), these trusts are designed to protect family wealth across generations. Courts usually avoid interfering with intergenerational trusts. However, if significant funds have been distributed during the marriage to support a couple’s lifestyle, this could influence the court’s decision.

Offshore Trusts

Trusts held in foreign jurisdictions (such as Jersey or the Cayman Islands) add further complexity. While UK courts may issue orders, foreign jurisdictions may not enforce them. This makes expert legal advice essential if offshore assets are involved.

Sham Trusts

If a trust is believed to have been created solely to reduce the size of the matrimonial pot – for example, by hiding assets – it may be challenged as a sham. Proving this can be difficult, so early legal advice is critical if you suspect a trust has been set up in bad faith.

The Court’s Powers over Trusts in Divorce

If a trust is deemed nuptial, the court has extensive powers. These include:

  • Changing beneficiaries to ensure a fair distribution
  • Appointing new trustees
  • Transferring trust assets directly to the non-beneficiary spouse

To exercise these powers, the court will examine:

  • The trust deed
  • Any letters of wishes from the settlor
  • The trust’s history and asset distributions
  • The list of beneficiaries and how they’ve benefited in the past

If a trust is not nuptial, the court has more limited powers – though it may still consider the trust if the non-beneficiary spouse’s financial needs cannot otherwise be met.

Can a Trust Be Challenged?

Yes – a trust can be challenged if:

  • The correct legal formalities were not followed in its creation
  • It is suspected of being a sham

For example, if the trust deed is unsigned or the trust is clearly designed to reduce the divorce payout, it may be invalid or subject to scrutiny.

To successfully challenge a trust, you’ll need to act quickly and gather strong evidence. Our expert family lawyers can guide you through this process with efficiency and discretion.

Divorces involving trusts are legally and emotionally complex. Whether you are seeking to protect your trust assets or believe your spouse is hiding assets via a trust, at Arlingsworth Solicitors, we can help.