Trusts within financial settlements
24th August, 2026
Within the financial negotiations arising from a divorce/dissolution of the marriage, both parties are required to provide a clear, accurate and complete picture of their financial circumstances.
This is commonly known as ‘full and frank financial disclosure’. This includes any interests in trusts that the parties may have.
Examples of trusts include (but are not limited to):
1. Bare trusts
This is the simplest kind of trust. The trustee merely holds legal ownership of the asset without any powers of management or control. The beneficiary holds the complete beneficial ownership of the trust property, and the trustee must act on the beneficiary’s instructions, rather than having any active management or duties. In financial remedy cases, the assets held in a bare trust can effectively be regarded as fully available to the beneficiary party on their request.
2. Fixed trusts
A fixed trust specifically defines the beneficiary’s interest in the trust – it may be immediate, or deferred to a date or specific event in the future. An example is a trust created under a will that leaves specific shares of the estate, or specified assets, to named beneficiaries or the right to occupy trust property.
3. Discretionary trusts
A discretionary trust defines the beneficiaries to whom the trustees may make provision, but the trust gives the trustees discretion whether and when to apply any part of the trust assets to any beneficiary. In a true discretionary trust the beneficiary has no right to any of the trust property. The beneficiary only has the right to ask the trustees to exercise their discretion and to consider providing trust assets to them as a financial resource. Discretionary trusts cause the most difficulty in financial negotiations because often each spouse has a different view as to what the trust can/will provide. It is necessary to look at what a spouse has received from the trust historically as a means of considering what income and/or resources it can provide in the future.
4. Contingent trusts
These are typically trusts for children, where each child has an interest that is contingent on reaching a certain age, such as 18 or 25. The trustees usually have powers to use income and capital to benefit the children before they reach the specified age.
If a spouse is the beneficiary of a trust then they will be required to provide details of its history, and a copy of the trust deed. Any deeds of variation and letters of wishes will also need to be examined. It is likely that disclosure of trust accounts, a schedule of assets owned by the trust and valuations of the assets within the trust will be required to enable the court and the respective legal representatives to consider how any income and/or wealth held by the trust has been paid to/used by the spouse(s) over the years.
The court will assess how likely it is that the beneficiary spouse is to receive a financial benefit from the trust and how this could impact their future income and/or resources. This is a relevant consideration under Section 25(2)(a) of the Matrimonial Causes Act 1973 (MCA 1973), i.e. the court must consider “other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future“.
Sometimes, funds in a trust may be classed as non-matrimonial property, meaning if the spouses’ needs can be met with the rest of the matrimonial assets such as income, property, savings and investments, business interests, pensions etc., then the trust could be ring-fenced and excluded from the ‘matrimonial pot’ that is to be divided upon divorce. However, this depends on the circumstances of the case, and each couple will have a bespoke set of circumstances so a nuanced assessment will be required.
Navigating this area of law can be complex, and the right approach will depend on the specific circumstances of each case. Seeking early legal advice can help you understand your position, avoid potential pitfalls and help you to make informed decisions. If you would like guidance tailored to your situation, our specialist matrimonial solicitors are on hand to provide clear, straight-forward, practical advice and support every step of the way.
Contact our team to discuss how we can help.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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