Introduction to trusts within financial proceedings
Produced in partnership with Rebecca Dziobon of Penningtons Manches Cooper
Introduction to trusts within financial proceedings

The following Family practice note produced in partnership with Rebecca Dziobon of Penningtons Manches Cooper provides comprehensive and up to date legal information covering:

  • Introduction to trusts within financial proceedings
  • What is a trust?
  • Treatment of trust assets
  • Trusts as a financial resource
  • Availability of trust assets
  • Subsequent orders
  • Impact of Prest v Petrodel Resources
  • Unpaid lump sum orders—enforcement via variation proceedings

Introduction to trusts within financial proceedings

Trusts arrangements are increasingly popular with, for example, foreign individuals who live in the UK while retaining their non-UK domicile under UK law. UK tax charges can be avoided by living off capital held by offshore trusts. This means there is no need to remit capital/income onshore.

As a result family law has developed to deal with trust assets on relationship and family breakdown. There are three methods of approaching trusts on divorce/dissolution:

  1. the variation of nuptial settlements under section 24(1)(c) of the Matrimonial Causes Act 1973 (MCA 1973) or Schedule 5, paragraph 7(1)(c) to the Civil Partnership Act 2004 (CPA 2004)—see Practice Note: Trusts—variation of a nuptial settlement

  2. the use of property/trusts law to attack trust validity and/or to allege the improper transfer of assets to a trust and/or that the trust is a sham—this aspect is covered by Practice Note: Trusts—using trusts or property law in financial proceedings

  3. the treatment of trust assets as a resource available to one of the parties and therefore available for distribution by the court—see: Trusts as a financial resource under the Matrimonial Causes Act 1973, s 25(2)(a)

What is a trust?

It is vital for family practitioners, when called upon to advise on financial proceedings involving trusts, to comprehend the nature of trusts, the position of settlor, the duties and obligations of trustees, and

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