5 Practical Ways to Protect a Trust in a Divorce

If a trust forms part of your financial picture, you may assume: “It is separate – it cannot be touched in a divorce.” That assumption is often understandable. Trusts are commonly set up to distance wealth from personal ownership and preserve it for children or future generations.

However, the reality is more nuanced. The family court in England and Wales has wide discretionary powers. When a marriage breaks down, the court looks at the whole financial landscape, and in many cases, that can include trust assets or expected trust benefits.

So the real question is not whether a trust may be examined and considered, but whether you are in the strongest possible position when it is.

At a glance: what each strategy does

**(This is just a general overview. The right approach depends entirely on your specific situation.)

Your trust might not be as watertight as you think

Before looking at protection strategies, it helps to understand why the court scrutinises trusts in the first place.

Under the Matrimonial Causes Act 1973, judges must consider all the financial resources available to each party, including resources that may become available in the future. The court has interpreted this concept broadly, which means certain trusts may fall within that assessment.

There is also the principle of “judicious encouragement”, arising from the case of Thomas v Thomas [1995]. While the court cannot directly order trustees to make distributions, they may proceed on the basis that trustees could reasonably be expected to respond to judicial encouragement, particularly if a trust lacks genuine independence.

None of this means a trust will automatically be unravelled. But it does mean preparation, structure, and evidence matter.

1. Show that the trust has nothing to do with your marriage

Not all assets are treated equally in a divorce. The Court makes a real distinction between assets you built together during the marriage (matrimonial assets), and assets you brought into it, like an inheritance or a family trust set up long before you met (non-matrimonial assets).

If a trust was created before the marriage, your spouse has never been a beneficiary, and the trust has consistently been operated independently of married life, you may have a strong argument that it should be treated as non-matrimonial.

Evidence is critical, and the court will be looking for trustee minutes, the original deed, and emails or letters showing the trust’s purpose. The court needs to see a clear paper trail. A clear, consistent paper trail strengthens credibility.

If separation is on the horizon and trusts are involved, early advice can be invaluable. Our team regularly advises clients on financial settlements involving complex trust structures and how they may be viewed by the court.

2. Show that other people rely on the trust too

A trust that exists primarily for one individual looks very different to the court than one that genuinely exists to support a wider family.

Where siblings, children, parents, or future generations are real beneficiaries, the court is typically more cautious. Judges are reluctant to make orders that would unfairly prejudice third parties who have no involvement in the divorce.

What matters here is not just what the trust deed says, it’s how the trust has actually operated in practice, e.g.

• Have other beneficiaries received meaningful distributions?
• Do trustee records show real consideration and judgment?
• Is there evidence the trust is run with the wider family in mind?

Where the answer to any of the above is yes, this should be clearly and carefully evidenced.

3. Challenge whether you will ever actually see any money

Trust assets can only be treated as a financial resource if there is a realistic likelihood that you will benefit in the foreseeable future.

In Charman v Charman [2007], the Court of Appeal made clear that discretionary trust assets should only be taken into account where there is a genuine prospect of benefit. Where distributions are rare, unpredictable, or genuinely discretionary, the court may place little or no weight on the trust.

That said, a history of regular or expected distributions can undermine this argument, even where the trust is formally discretionary.

Independent offshore trustees, for example, in Jersey, the BVI, or the Cayman Islands, who can demonstrate genuine autonomy, may further reduce the likelihood that trust assets are treated as effectively available.

4. Take “sham” accusations seriously before they’re made

A finding that a trust is a sham is rare, but it is the worst-case scenario.

If the court concludes that a trust exists in name only and that both the settlor and trustees intended it not to have genuine legal effect, the trust may be disregarded entirely. The assets can then be treated as belonging personally to one spouse.

Following Minwalla v Minwalla [2004], the court looks for warning signs such as:

• trustees who simply follow instructions
• no meaningful decision-making
• records ignored in practice
• effective control remaining with the settlor despite trust documentation

The court will examine the entire history of a trust. Addressing weaknesses early, rather than reactively during proceedings, can be critical.

5. Use a nuptial agreement to protect trust assets in advance

A carefully drafted prenuptial or postnuptial agreement can be one of the most effective ways to clarify how trust interests will be treated on divorce.

Since Radmacher v Granatino [2010], the English court has given significant, though not automatic, weight to nuptial agreements that are freely entered into, properly understood, and fair.

An agreement that:

• clearly identifies relevant trust interests
• records their origin and purpose
• states how they should be treated on divorce

can substantially reduce uncertainty and argument later.

For clients with offshore or cross-border trust structures, consistency across jurisdictions is particularly important.

Some common questions

Can a discretionary trust be included in a divorce settlement?

Potentially, yes, if there is a real likelihood of benefit. Much depends on the trust’s history, structure, and the trustees’ independence.

Can the court force trustees to distribute funds?

Not directly. However, the court may apply judicious encouragement, particularly where trustees appear aligned with one spouse.

Bare trust vs discretionary trust – what is the difference?

Assets in a bare trust usually belong absolutely to the beneficiary and are commonly treated as that person’s assets on divorce. Discretionary trusts allow more scope to argue the assets should not be treated as available.

How are offshore trusts treated?

With the same scrutiny as domestic trusts. If the court in England and Wales has jurisdiction over the divorce, offshore status alone offers no immunity.

Does it help if the trust was set up before marriage?

Often, yes. Pre-marriage trusts holding inherited or family wealth are more likely to be treated as non-matrimonial, though they may still be relevant if needs arise.

How We Can Help

Trusts add complexity to a divorce, and how they are handled can have long-term financial consequences.

We regularly advise clients with discretionary trusts, offshore structures, and multi-jurisdictional assets. Our approach combines technical legal analysis with a clear understanding of how courts apply discretion in practice.

If trusts form part of your financial picture and separation is a possibility, early advice can make a real, meaningful difference.

Call us on 01625 544 650 or get in touch via our website to discuss your situation confidentially.