Trustees play a vital role in managing and safeguarding trust assets for the benefit of beneficiaries. However, when divorce proceedings arise involving a beneficiary or their spouse, trustees can find themselves drawn into complex and high-stakes legal disputes. In such situations, seeking specialist legal advice is essential to protect the integrity of the trust, fulfil fiduciary duties, and navigate the numerous challenges posed by family law.

There are a number of reasons why trustees should seek legal advice when facing involvement in divorce proceedings:

1. Understanding Trustee Obligations and Fiduciary duties

Trustees have a fiduciary duty to act in the best interests of all beneficiaries and manage the trust assets according  to the terms of the trust deed. When a trust becomes a focal point in divorce proceedings, trustees may be required to provide information, documents, or even participate in hearings. Legal advice ensures trustees fully understand their obligations, such as:

• Complying with disclosure requests from the court without overstepping confidentiality.
• Acting impartially between beneficiaries, especially if they hold conflicting views on the divorce.

An experienced solicitor will help trustees navigate these duties.

2. Protecting Trust Assets

Divorce proceedings can look at trust assets to determine whether they should be included in the marital pot for division.

Trustees must be prepared to defend the integrity of the trust and demonstrate that it is not being used to shield assets unfairly.

Trustees may need to:

1. Provide evidence showing the legitimate purpose and independent management of the trust.
2. Establish whether the trust qualifies as a ‘nuptial settlement’ under Section 24(1)(c ) of the Matrimonial Causes Act 1973.

 

3. Navigating Court Scrutiny and disclosure requirements

The Family Court has extensive powers to investigate the financial arrangements of the parties to the divorce, including trusts. Disclosure requirements can be complex in respect of trustees. Trustees may be required to:

1. Disclose trust documents, including the trust deed, financial accounts and correspondence.
2. Provide witness statements or potentially attend at court hearings to explain the trust’s operation.

4. Addressing applications to vary a trust

If a trust is deemed a nuptial settlement, the court may have the power to vary its terms to provide financial relief to a divorcing spouse. This can be a significant concern for trustees, as it may alter the original purpose and operation of the trust. Legal advice will help trustees to:

1. Assess whether the trust qualifies as a nuptial settlement.
2. Respond to any potential application for variation.
3. Negotiate potential solutions that preserve the trust’s integrity while addressing the court’s concerns.

5. Managing conflicts between beneficiaries

Divorce proceedings can create tension between trustees and beneficiaries, especially if beneficiaries perceive their trustees are not adequately protecting their interests. For example, a divorcing beneficiary may want trustees to resist disclosure or claims on the trust, while other beneficiaries  may have conflicting views. Legal advice equips trustees to:

1. Manage disputes and maintain neutrality.
2. Communicate effectively with all parties.
3. Ensure their actions are legally and ethically sound
4. Minimising legal risks

Trustees who become involved in divorce proceedings without legal advice risk misstep that could lead to personal liability, breaches of fiduciary duty, or damage to the trust.

Our solicitors at MSB can provide trustees with this essential early legal advice to help them identify and mitigate these risks as soon as they are aware of any potential involvement in divorce proceedings.