Many people, including professionals, misunderstand the role of discretionary trusts in divorce proceedings.
The myth that discretionary trusts are protected.
There is a widespread myth that discretionary trusts cannot be used in divorce financial claims. People often believe that if trust payments are not guaranteed then the beneficiary’s spouse cannot claim against them.
Neil Denny is a divorce lawyer with Diane Genders Solicitors, specialist family lawyers in Lincoln. He explains as follows;
“The question of whether the benefits are discretionary or not is not the point.
“If a trust is set up to provide benefits for an individual and mentions their spouse or children then the trust can be ordered to pay out on divorce. This is true even if the benefits are at the trustees’ discretion.
“You should always start with looking at the document that establishes the trust fund.”
Any trust, even a discretionary one, might qualify as a “Nuptial settlement.”
The court’s power to vary discretionary trusts.
The court has unlimited powers under the Matrimonial Causes Act to vary such agreements. The court can rewrite the trust agreement. As a result the trust can be forced to make specific provisions for the beneficiaries’ spouse, civil partner or children.
“We often hear the comment that a trust is not relevant because it is discretionary. It is a worry that people are setting up trusts unaware of this risk further down the line.
“Husbands and wives might also be concluding divorce financial remedy claims without knowing about the claims they can make against their partner’s trust fund.”
Get in touch if you have any questions about discretionary trusts and divorce. Our experienced divorce lawyers will be happy to help you.
If you have previously been told that you could not claim against a trust because it was discretionary then you should also get in touch.
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