Separation and divorce:
Trusts
Where there are existing family or other trusts, it will be appropriate for review in the light of separation or divorce. All factors will need to be considered, including the options available to the trustees. It may be appropriate to change beneficiaries or for trustees to resign or be replaced, depending on the terms of the trust. Professional advice will be necessary to consider legal and tax implications of any changes. For example, if the trust is a life interest trust and the life tenant is removed as a beneficiary. this is a deemed disposal by him or her of the underlying trust assets for inheritance tax purposes. This may restrict subsequent inheritance planning.
If a trust has been created shortly before any separation or divorce proceedings, or in anticipation of them, and the court believes the primary motive was to ‘protect’ assets, the trust can effectively be ignored by the court in determining any financial settlement. The trust itself will be left intact but the value of the underlying assets may be included in any calculation as if the trust did not exist. In extreme circumstances the court can order that the trust be wound up.
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Where next?
Within Separation and divorce…
- The process itself
- Ancillary relief
- The tax effects of separation and divorce
- The family home
- Wills and inheritance tax planning
- Pensions
- Funding the settlement
- Investing the settlement
General…
