Divorce and Trust Disclosure
The family team at Hunters Law LLP works closely with our Private Client colleagues to advise Trustees about how they should respond to a request for trust disclosure from a non-beneficiary or beneficiary spouse who is going through divorce litigation. Disclosure is often sought by a non-beneficiary spouse to help them consider whether a claim can be brought against a trust if it is thought that the trust is a “nuptial” settlement over which the court has direct power. A disclosure request is usually accompanied by a threat to make an application to court for a Judge to order that the requested disclosure is provided, if it is not volunteered. Any trust disclosure has to be made to the beneficiary spouse’s legal team because Trustees have a general duty of confidentiality not to disclose trust information to a non-beneficiary.
The most common type of trust we see feature in divorce litigation is a discretionary trust. A beneficiary is usually entitled to receive documentation to enable them to understand the value of the trust and their interest or expectation under it. If a beneficiary does not have sufficient information to hold the Trustees to account in their role as stewards of a trust, they are able to ask the court to intervene and order that such disclosure is provided. A beneficiary’s entitlement to disclosure is rooted in the Trustees’ duty to keep beneficiaries informed, alongside the court’s role to supervise Trustees, rather than in a beneficiary’s proprietary right to documentation. It is clear that documents detailing the reasons for Trustees’ decisions, such as resolutions and the minutes of meetings are not trust documents which need to be disclosed so far as they relate to the exercise of Trustees’ powers which are not administrative. This is because Trustees are not required to provide reasons for the exercise of their powers which are not administrative in nature.
What disclosure is required from Trustees of a trust in divorce litigation, in which one of the spouses is a beneficiary? A typical request might be for the following documentation:
- The original deed of settlement and all subsequent of variation;
- All deeds of appointment and retirement of Trustees;
- All instruments adding assets into the trust;
- A list of distributions of income and capital from the trust to the beneficiary spouse during the last three years;
- A copy of the trust accounts for the last three years;
- If the trust has a controlling interests in a company, a copy of the company accounts for the last three years;
- A copy of all letters of wishes;
- Details as to who the protector is of the trust; and
- If any of the children in the family are beneficiaries of the Trust, an explanation of their interest.
Trustees may be uncomfortable providing this level of disclosure and whether the Trustees should meet such requests requires specialist legal advice because much depends on a number of issues, such as:
- Whether a family court can and will make a disclosure order against the Trustees;
- The potential claims that could be made against the trust;
- Whether the court is likely to join the Trustees to the divorce litigation, and the cost of being a party to such proceedings;
- Whether the trust plays a central or peripheral role in the make-up of the parties’ potential assets; and
- Whether the trust is a “nuptial” settlement, which is one over which the court has express powers under s24(1)(c) of the Matrimonial Causes Act 1973. A court is much more likely to order extensive disclosure against Trustees of a trust which is a nuptial settlement.
If you have any questions, please contact Amy Scollan, a Partner in the family team, on 07778 858670 or firstname.lastname@example.org