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As financial portfolios become more complex, financial trusts are becoming increasingly common, because they can be shaped to serve a variety of purposes. Trusts are routinely used as tools for gifting, asset management, inheritance tax planning and protection from creditors. They can be established whilst those involved are living, or can be included in a will to be established after death. But what happens in divorce?
“An average of 42% of marriages end in divorce, and it can be devastating. With distrustful spouses and threats of divorce, protecting family inheritance has become all too common a question, and a Discretionary Trust could be the best solution in the event of a disagreement on assets and inheritance,” says Granville Turner, Director at Company Formation Specialists, Turner Little.
Trusts date back to the Middle Ages, when Knights would leave their lands to be held by caretakers during their participation in the crusades, but in today’s world, there are more laws and guidance into how trusts work and why you would use them. The basic principle is that an asset is given to a trustee who will hold on to it and manage it on behalf of the beneficiary. The trustee is therefore ‘trusted’ to act in the best interest of any beneficiary.
“A Discretionary Trust is a form of trust in which there is at least one beneficiary who must be living at the time the Trust is created; others can be added later. Beneficiaries do not have an automatic right to any income or capital from the Trust and the Trustees do have some discretion to determine how and when the Beneficiaries will receive a benefit, depending upon how tightly a Trust Deed is written but, it should be borne in mind, that Trustees have an overriding responsibility to act always in the best interest of the beneficiaries. This can be established as part of lifetime planning, or incorporated within a Will, to take effect after death,” he adds.
“Whilst there is a discretion to disclose an interest in a Discretionary Trust when dealing with divorce, they often provide more protection and can be used to help protect family wealth,” says Granville.
At Turner Little, we specialise in creating bespoke solutions for both individuals and businesses of all sizes. The knowledge and expertise of our specialists, ensures we are able to assist with any enquiries, no matter how complex. To find out more about how we can help you plan, get in touch with us today.