Good morning
Is a discretionary trust still the way to go please if one of the testator’s children is in the middle of a divorce? If so can it be a discretionary trust in respect of just her third share or is it better to place the whole estate into the DT?
If the DT is unlikely to work and the family courts can set it aside, can you let me know if the testator has any other options please other than leaving out the divorcing child absolutely?
Many thanks
Deborah
A Will speaks from death. A court cannot make a financial order against the property of a living non-party to a marriage.
After death the Court can take two possible approaches to assets in a DT in the Will.
1 it can vary an ‘ante-nuptial’ or ‘post-nuptial’ settlement under Section 24(1)(c) of the Matrimonial Causes Act 1973. The Settlor can be a non-party e.g. a parent. There is case law on what qualifies as such a settlement.
2 trust assets can be treated as a ‘financial resource’ of a divorcing spouse under Section 25(2)(a) of the 1973 Act in accordance with case law. See for example SR v CR [2008] EWHC 2329 (Fam).
An order cannot be made against the trustees directly but the size of a lump sum order against a party to the marriage can be set in the expectation that it will need to be met to a greater or lesser extent from that spouse’s realistic expectations of future distributions from a trust, albeit at the absolute discretion of the trustees over which the court has no control, and unashamedly by way of a degree of “judicial encouragement” to those trustees to make these.
How long after a divorce a spouse can seek an order is addressed in Wyatt v Vince [2015] UKSC 14 and, in theory, it can be a long, long time after. Even after death, if the settlement is “nuptial” unless, probably, a prior consent order precluded a claim under the 1975 Act and subject to the 6 month time limit. Otherwise DT assets will not be part of the deceased’s “net estate” as judges seem to accept that “financial resources” cannot be craftily augmented by trustees during the deceased former spouse’s afterlife (if any).
A valuable article in the public domain though a little dated is at https://www.wilberforce.co.uk/wp-content/uploads/2014/10/ARTICLE-How-to-side-step-valid-trust-and-corporate-structures-AM-JH.pdf
Jack Harper
Agree with Jack’s analysis above.
I’d only add - since White v White the court is able to “ring fence” and decide what is matrimonial property ref s.25 Matrimonial Causes Act 1973. Inheritances can be treated differently.
Broadly its not absolute the inheritance would form part of the divorce.
Richard
PFEP
I would always recommend a discretionary trust over the whole estate rather than just the divorcing child’s notional share. It is then less obvious on the face of the Will that the discretionary trust fund is intended for that child. It is also best not to make express reference to divorce in any letter of wishes.
Diana Smart
Gordons LLP
Dealing with a similar issue two years on.
Agree that it’s probably best to include whole estate in DT rather than just the beneficiary’s quarter share- if the clients are agreeable to doing that.
Diana you mention the letter of wishes not mentioning the divorce. Is it better do you think not to have a letter of wishes at all or will that just raise suspicion?
Also my clients would like to appoint their divorcing son together with his sister as Trustees - would it be better not to appoint him?