The highly experienced team at Branch Austin McCormick have considerable skill in dealing with both setting up family trusts and also in dealing with them during the litigation process. In a recent High Court case Julius Brookman successfully managed to protect a family trust, but he explains some of the issues that arise and the general position of trusts resulting from his experience.
General position on trusts
Provision for distributing the assets between two divorcing spouses is governed by Section 25 of the Matrimonial Causes Act 1973 which gives family courts a high level of discretion to distribute the assets and bring in assets to what is known as the “matrimonial pot”, even if they are not in the parties’ names. It is increasingly common for family law specialists to act for trusts and/or the issue of trusts to be brought into family cases.
Trusts may take a variety of formats:
1.They may be discretionary trusts which allow the trustees to make certain decisions as to how the trust income and capital should be distributed;
2. Life interest trusts which provide only a limited benefit to a specified person during their lifetime;
3. A declaration of trust which places an interest in property or other assets on trust for the benefit of third parties, rather than the legal owner of such property or assets..
Trusts are often chosen as a tax efficient method of preserving family assets or family wealth. Family law judges have considerable discretion to “crack open” a family trust in the right circumstances.
Recent Case Experience
As a general rule, even an overseas trust may be open to a claim from a spouse. However, in Julius’ most recent case, he was successful in protecting an overseas trust because the other party failed to serve the court proceedings correctly and properly on the trustees. It is therefore very important to make sure you seek specialist advice from our team as to the appropriate method of serving documents on a family trust.
In Julius’s case, the overseas trust was based in another common law jurisdiction that had an exclusive jurisdiction clause. In other words, all claims and disputes relating to that trust could only be dealt with in that other common law jurisdiction. This added to the ability of our firm to defend the interests of the trust.
If you are either a trustee or a other interested party looking for advice on how to protect a family trust, please get in touch with one of our excellent team. The way a trust operates is very fact specific and we would be pleased to consider your own distinct circumstances and advise you on how we can assist.
For further information on the issues raised, please contact Julius Brookman on +44 (0) 207 851 0107 or jikb@branchaustinmccormick.com
