When dealing with a financial settlement as part of divorce proceedings, a number of factors need to be decided, such as where is each party going to live, where will the children live, will one spouse need maintenance from the other, etc. All the financial resources of both parties must be disclosed and this includes a potential benefit held in trust. Here are a couple of examples of questions I am asked:
What if my wife, Rachel, is likely to be a beneficiary in a Will?
If Rachel’s father, who is in good health, has made a Will and names Rachel as a beneficiary, there is no certainty that Rachel will receive any benefit. Her father may change his Will, spend all his money or otherwise dispose of it. There is no guarantee that Rachel will receive anything and if she does, there is no guarantee when. Therefore, it is difficult to argue that a future potential benefit from her father’s Will should be included in the terms of a divorce settlement.
What if my husband, Ross, is a beneficiary in a discretionary trust?
If Ross is named as a beneficiary in a discretionary trust made by his deceased mother in her Will, should the potential benefit from the discretionary trust comprise part of his assets for the purpose of the divorce settlement?
The Court would, as a starting point, recognise that Ross would not have a guaranteed interest in the trust but may receive a benefit if the trustees, in their discretion, decide so. The Court would then look at evidence of any previous payments made to Ross, how often, what amounts he has received and any written guidance given by his mother to the trustees.
The Court would then decide whether it was likely that Ross would receive further funds from the trust and when any payments would be made. Finally, the Court would look at whether his wife should receive a share of such a benefit.
The more likely it is that
Ross is to receive a benefit, the more likely it is that such a benefit will form part of the divorce negotiations.
It is very important to take legal advice when negotiating a financial settlement, in particular if there are any trusts to be taken into account.