Broken glass of tea Down on the ground.

Families often make provisions for their children by using trusts. This can be with the intention that those monies will be passed to them at a certain age or to provide income with capital being passed down to future generations.

So how will these trust funds be treated if one of the beneficiaries should divorce during the lifetime of the trust? Are they simply excluded or are they considered an asset of that party to the marriage?

Treatment of Trusts | How does it work?

This type of wealth protection or tax planning can be vulnerable to challenge in divorce proceedings. The court will look at how the Trust has behaved in the past if there has been any distribution of monies from the trust to the benefitting party of either income or capital and for what purpose. For example, if a beneficiary has been advanced monies in the past to purchase a property, it may conclude that would happen again and this is, therefore, an asset available to that party to meet their housing needs. The question the court will have to consider is if the party asked for monies from that trust would they be provided? If it concludes that it would, this will be viewed as an available resource.

In addition, some trusts are also viewed as nuptials. These are trusts settled on one party as husband or wife. As such the court does have the power to choose to vary that trust but will only do so to the minimum degree to achieve fairness between the parties and must give consideration to the impact on any other beneficiaries of the trust. An application to vary a trust in this way can be complicated and expensive.


The focus of a court in any divorce settlement must be on fairness and needs. The court looks at the family assets as a whole. Taking steps to protect assets being passed down through generations is always advisable through the use of trust and pre or post-nuptial agreements.