Trusts in Family Breakdown: Alternative Solutions

06 NOV 2009

Arshoo Singh, TEP Solicitor, Kingsley Napley

The use of trusts in the context of matrimonial proceedings is not a new phenomenon. In recent articles in Family Law the question of trusts has centred on existing trusts and how to vary or change the terms of the trust to benefit a non-beneficiary of the trust or on establishing the extent of the parties' interests in a trust so as to treat this as a resource of a party to the proceedings. A current hot topic in the private client arena, and which is considered in this article, is the suitability of trusts where a relationship breaks down between married or unmarried parents, to provide a home, (whether it is the former matrimonial home or the purchase of another property) for the carer or occupying parent and for children during their minority or until they reach independence (usually when they turn 18 or complete full time education).

Increasingly, in an era where the former home is the main asset of the family, the party giving away the asset (most commonly the father) would want to safeguard the asset so that the home will pass to the children of the relationship rather than to the mother outright or her future partner or spouse. Traditionally, a trust was created to implement this and also to provide a fund for the related expenditure and maintenance. However, alternative arrangements might be more advantageous not only from a tax planning perspective but also to address non-tax considerations (for example the balance of power), while still protecting the interests of the dependant children and addressing the needs of the occupying parent. These considerations and the alternative options are explored in more detail below in the context of providing accommodation but are equally relevant when considering the suitability of trusts to provide for other types of assets (such as shares in a family company) and related financial arrangements.

To read the rest of this article, see October [2009] Family Law journal.

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