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Trust Your Trustees

Trusts are set up for a wide variety of reasons, but mainly to protect assets on behalf of beneficiaries (which can include yourself). Trusts can help to shield potential tax liabilities, and prove of real benefit to you and your family in the event of a relationship/asset dispute.

If there are assets that have been passed down through your family, or if you wish to provide financial security for generations to come, then a family trust may be worth considering. A family trust can be particularly important in the event of your children choosing what you consider to be “unsuitable marriage material”.  The Trust will endure even if their relationship doesn't.   

Family trusts are commonly established to make provision for children and grandchildren.  The trustees have the discretion as to how and when to distribute the trust property.  If you keep the description of potential beneficiaries to your blood line then your 'in-laws' are not able to benefit directly from the family trust.  If you give a beneficiary a 'right' to enjoy trust assets this can protect assets by keeping them in the trust but the interests will be included in the financial assessment of the beneficiary upon a divorce.  

When negotiating the terms of a financial settlement on divorce, full and frank financial disclosure must be exchanged. If you have a 'right' or 'specific interest' in a trust then this can also be brought into consideration as part of your financial resources.  It is therefore essential to ensure that the wording of the trust deed is specific as to who benefits under the terms of the trust and how the trustees administer/apply the trust assets.  Trusts are not immune to the scrutiny of divorce courts, but the manner in which trustees have conducted themselves regarding the distribution of assets in the past is extremely important and always worth considering if you are a trustee or a beneficiary.

Trusts have alternate uses when relationships breakdown and can be put in place to safeguard assets until a certain condition has been met - such as a youngest child reaching a certain age - whereby the trust comes to an end and the assets distributed in accordance with the trust deed. Trusts can be used to set aside proceeds of a life insurance policy to meet a potential liability or responsibility so that the funds are available outside of your estate and free of complicating your other personal matters, this again can be useful for financial settlements in a relationship breakdown.

If you have any questions about making a family trust or the affect of trusts in a relationship breakdown then please contact Trudy Rogers on 01635 569670 or for further information.