Trusts and divorce: Understanding how trusts affect splits

Understanding trusts and divorce is crucial for anyone going through separation, particularly when significant assets are involved. Trusts can complicate the division of property and financial settlements, making it essential to consult experienced Family Law Solicitors in England and Wales.

What is a trust?

A trust is a legal arrangement where one person (the settlor) transfers assets to another (the trustee) to hold for the benefit of a third party (the beneficiary). In divorce proceedings, trusts can include:

• Family trusts.
• Discretionary trusts.
• Protective or spendthrift trusts.
• Settlements made to benefit children or other family members.

Understanding the type of trust and its terms is essential when assessing how assets may be treated during divorce.

How trusts affect divorce settlements

Trusts can complicate divorce settlements because the assets are not legally owned by the spouse, even if they benefit from them. Courts in England and Wales generally consider:

• Whether the trust assets are accessible or discretionary.
• How the assets have been used during the marriage.
• Whether one spouse has indirect control or benefit from the trust.

In some cases, the court may include trust assets in the overall assessment of fairness, particularly if they have been used to support the family or if the spouse has a reasonable expectation of benefit.

Tracing trust assets

When determining financial settlements, solicitors may need to trace the flow of funds from trusts. This involves:

1. Reviewing trust deeds and legal documentation.
2. Identifying distributions made during the marriage.
3. Establishing whether assets were effectively treated as marital property.

Tracing can reveal indirect benefits that may influence the court’s decision in trusts and divorce cases.

Protecting trust assets during divorce

To protect assets held in a trust, it is advisable to:

• Keep trust funds and assets separate from marital property.
• Document all distributions and uses of trust assets.
• Seek legal advice on the enforceability of the trust in divorce proceedings.
• Consider pre-nuptial or post-nuptial agreements addressing trust assets.

Impact on financial settlements

Trusts can influence financial settlements in several ways, including:

• Adjusting spousal maintenance if trust income supplements household finances.
• Determining fair division of assets by accounting for indirect benefits.
• Protecting inherited or family wealth from being treated as divisible marital property.

The court aims to achieve fairness, taking into account both direct and indirect benefits from trusts.

Case scenario

A spouse was a beneficiary of a discretionary family trust. During divorce proceedings, the court examined distributions and whether the spouse had relied on the trust to maintain their standard of living. Legal advice ensured that the trust was properly considered, resulting in a fair settlement for both parties while protecting the intended purpose of the trust.

Expert insights

• Trust assets are not automatically excluded from divorce settlements; careful legal analysis is required.
• Early consultation with family law solicitors helps identify indirect benefits from trusts.
• Proper documentation of trust arrangements can prevent disputes and clarify entitlements.

Our team of expert Family Law Solicitors can help you understand and support you through the entire process of divorce – and aim to provide you with clear, sound and practical advice.

Whether you wish to begin the application yourself, or you are the respondent to the application, we aim to provide our clients with tailored and comprehensive advice. Our family divorce solicitors are able to advise you on the most suitable way forward, taking into account your particular circumstances. Contact us for more information.

Benefits and challenges

• Benefits:
  • Trusts can protect family wealth and ensure it is used as intended.
  • Provides clarity in financial planning and asset protection.
  • Helps manage expectations during divorce settlements.
• Challenges:
  • Courts may assess indirect benefits, complicating settlements.
  • Tracing assets can be complex and time-consuming.
  • Potential conflicts if trust documents are unclear or discretionary.

FAQs

1. How do trusts affect divorce settlements?

Trusts can influence divorce settlements if the spouse has access to trust assets or receives indirect benefits. Courts in England and Wales consider fairness, looking at both direct and indirect benefits when dividing property.

2. Can trust assets be protected in a divorce?

Yes. Keeping trust assets separate, documenting distributions, and obtaining legal advice can protect the assets and clarify how they should be treated in divorce proceedings.

3. What is a discretionary trust?

A discretionary trust is a trust where trustees have discretion over how and when to distribute assets to beneficiaries. Such trusts can complicate trusts and divorce cases if a spouse is a potential beneficiary.

4. Should I consult a solicitor about trusts and divorce?

Absolutely. Family law solicitors can assess trust arrangements, identify indirect benefits, and advise on how to protect assets while ensuring a fair settlement.

5. Can trust income affect spousal maintenance?

Yes. If a spouse receives income or benefits from a trust, the court may consider this when calculating spousal maintenance or financial settlements.

This article was produced on the 2nd January 2026 for information purposes only and should not be construed or relied upon as specific legal advice.