A guide to trusts in divorce — 5 practical tips to protect your wealth

Originally published on 31 July 2023 and updated on 23 January 2026.

The intersection of divorce or the dissolution of a civil partnership and wealth protection is rarely straightforward — especially when trusts, pre-nuptial agreements (prenups) and complex asset structures are involved. While many hope that careful planning will shield family wealth from the impact of separation, the reality is that the courts take a nuanced and searching approach.

Here, Amanda Long and Abbie Johnys from our family law team explore the main options and explain how trusts are dealt with following separation.

What is a trust?

In simple terms, a trust is a legal mechanism for managing assets or money.

The settlor (the person responsible for putting their assets into the trust) creates a trust for the benefit of third-party beneficiaries — most commonly, for family or friends. The asset or money is transferred by the settlor to designated trustees to ‘hold on trust’ (manage) for the beneficiaries. The trustees will hold the assets until a stipulated date (for example, until the death of the settlor or when a child turns 18), at which point the beneficiaries may have access.

You may already be using a trust without realising — for instance, if you own property in joint names with your partner or have a life insurance policy written in trust.

Trusts in divorce

It’s a common misconception that interests held in trusts can automatically be excluded from the court’s jurisdiction when tasked with the distribution of assets upon divorce or the dissolution of a civil partnership. The way that a trust is treated during divorce or dissolution proceedings differs depending on its type.

1. Trusts as financial resources

If a spouse is a beneficiary of a trust, any income or capital they receive — or are likely to receive — can be treated as a financial resource. 

When deciding this, the court will examine factors such as:

• Trust deed & any Letters of Wishes — to assess the purpose of the trust, whether the spouse is a primary beneficiary and relationships between all parties involved.
• History of distributions — past payments made from the trust to the spouse may suggest that further distributions are likely, while no such payments may indicate otherwise. The court will also consider the nature or regularity of any previous distributions, assessing each case on its individual facts and circumstances.
• Liquidity of the trust’s assets — if the trust holds liquid assets like cash, making distributions will be deemed to be more likely. Illiquid assets may limit access. 

Where a trust is treated by the court as a financial resource of one of the parties who are divorcing, its value may be offset against other family assets to achieve fairness. For example, where the total matrimonial assets amount to £1m — including a trust interest of £200,000 in the husband’s favour —the court might allocate £300,000 to the husband and £500,000 to their partner in circumstances where it’s appropriate for there to be an equal sharing of assets. 

In Whaley v Whaley [2011] EWCA Civ 61, the Court of Appeal held that the trust assets could be considered a part of the family assets and financial resources as the beneficiary had clear access to funds from the trust.

2. Nuptial settlements

Trusts that are connected to the marriage — for example, it was created for the benefit of one or both spouses or their children — may be classed as a nuptial settlement. In considering this, the court will also consider the timing and purpose of the trust.

If the court finds that a trust has a ‘nuptial element’, it has wide powers to vary such settlements and all assets held in it, including varying the beneficiaries, altering the terms of the trust to achieve fairness or transferring the assets to a spouse. The court’s powers don’t extend to creating a new settlement or varying a trust that isn’t deemed to be nuptial. 

Any variation will generally be confined to what’s required to address the couple’s needs or to ensure a fair division of assets. Put simply, if the trust represents the principal capital asset, it’s likely to become a focal point in the discussions and ultimate financial settlement.

Since there’s no strict definition of what is meant by a ‘nuptial element’, this is dealt with on a case-specific basis. 

3. Discretionary trusts

Discretionary trusts can be challenging for the Family Court as the trustees have absolute discretion over distributions. The court can’t compel trustees to act but rather an order would be made against the beneficiary spouse. The court may apply judicious encouragement — framing orders that strongly suggest that trustees should assist the beneficiary spouse in meeting their obligations under the order. 

If a spouse or civil partner falls within a class of beneficiaries in a discretionary trust, the court will usually only treat their interest as a financial resource in divorce or dissolution proceedings if they’re likely to receive the benefit immediately or in the near future. A key case is Charman v Charman [2005] EWCA Civ 1606 in which the court considered the likelihood of trustees advancing capital and factored this into the financial award.

4. Sham trusts

A ‘sham’ trust is one that the court considers to have been created to give the appearance of a genuine trust when that isn’t the case. Its purpose can be wide ranging but it may be designed with the aim of denying a spouse or civil partner access to certain assets in the event of divorce or dissolution.

If a trust is found to be a sham, the court can disregard it entirely. Proving this isn’t straightforward — the court will examine whether the trust was established with genuine intention, among other factors.

Where a trust is declared a sham, any interest in it will be treated as belonging directly to the spouse and the trust structure itself will be ignored by the Family Court.

Challenging a trust

If a spouse or civil partner wishes to make a claim over a family trust, they may do so by challenging its validity or seeking to vary the terms of the trust if it’s found to have a nuptial element.

If a trust is found to be invalid — for example, on the basis of its structure — the assets will revert to the settlor’s personal ownership in the same way as a sham trust and will be available for distribution on divorce or dissolution.  

Alternatively, a trust settlement that is non-nuptial at the time of its creation could later take on a nuptial character, particularly if there’s a flow of benefit to the spouse or civil partner during the marriage. By way of example, if the family home was purchased or owned by one spouse or civil partner’s family trust, the other spouse or civil partner may be able to establish that the trust is a nuptial trust, which would make it capable of being varied by the court.

Is it worth getting a prenup?

To protect beneficial interest held within a trust, it may be advisable for a couple to enter into a prenup. A prenup can be used as a tool or ‘insurance policy’ to safeguard a trust in the event of any dispute within potential future divorce or dissolution proceedings.

Each future spouse or civil partner must freely enter into the prenup without any undue pressure to sign the agreement and it’s recommended that independent legal advice on the terms and consequential effect of the agreement is taken.

A further consideration is the timing of the agreement. It’s recommended that there should be a reasonable period of time between the future spouses or civil partners entering into the agreement and the marriage or civil partnership taking place. If you consider that a prenup is required, the sooner you can speak to a specialist family lawyer, the better.

While prenups aren’t legally binding under the law of England and Wales, they can be highly persuasive to a court upon divorce or the dissolution of a civil partnership. If you have an asset to protect — such as a trust or an interest in a trust — you may wish to consider creating an agreement.

It’s also possible to enter into a nuptial agreement if you’re already married or in a civil partnership.

Practical tips & considerations for dealing with trusts upon divorce 

1. Be transparent & disclose early

Disclose any trust interests to your solicitor at the outset of a divorce and financial remedy proceedings. Concealing information can lead to adverse inferences by the court, cost penalties or damage to your credibility in the proceedings. The court can also compel trustees or associated parties (like accountants) to provide information.

2. Gather documentation

Collect trust deeds, Letters of Wishes and recent distribution statements. These will be essential for negotiations and during the financial remedy proceedings.

3. Understand your position 

If you’re a discretionary beneficiary, the court may still treat the trust as a resource. Discuss realistic expectations with your solicitor.

4. Consider settlement options & their impact

Explore all available settlement options — including whether trustees are willing to assist voluntarily — as this can help to avoid costly litigation and preserve family relationships. At the same time, understand that trusts can significantly influence the overall financial settlement, affecting lump sum payments, property adjustments and maintenance orders, especially if other assets are insufficient. Discuss with your solicitor how the trust’s structure and the cooperation of trustees may affect the final outcome and plan your approach accordingly.

5. Assess jurisdiction & location of trust assets

Offshore trusts can pose enforcement challenges, so discuss where the trust assets are with your solicitor early on. The court in England and Wales can make orders based on likely access to funds but you may need advice in the trust’s jurisdiction.

Advice for trustees

Trustees may also require independent legal advice in connection with a beneficiary’s divorce proceedings. They may be approached with requests for information and documents and it’s advisable for them to understand their position and obligations. In some circumstances, trustees may be joined to financial remedy proceedings as an intervener and may also require separate representation. 

Talk to us

The treatment of trusts, prenups and family wealth on divorce or dissolution is highly dependent on individual circumstances and the structure of your assets. If you’re considering separation, seeking specialist legal advice early is essential to protect your interests and navigate the complexities involved.

We also work closely with our private client team whose specialists advise on wealth structures, trusts and wider estate planning. This joined‑up approach means that clients receive coordinated guidance across both the family law and private client aspects of their situation, helping to ensure that arrangements are properly understood and protected during separation.

Our award-winning family law team is recognised by The Times Best Law Firms as among the best in the country. Speak to our specialist divorce and financial settlement solicitors today by calling 0333 004 4488, emailing family@brabners.com or completing our contact form below.

Planning for the future doesn’t have to be complicated. Brabners Personal connects you with leading legal professionals who make protecting your assets and securing your interests straightforward.