News and Insights

The fanfare for the arrival of divorce Friday as it appears every year in the newspapers shortly after Christmas.

You may no doubt be aware of the fanfare for the arrival of divorce Friday as it appears every year in the newspapers shortly after Christmas. Whilst it is true that the close proximity of family over Christmas often leads to an increase in divorce enquiries in January, the Christmas period also brings good news for families, as many people choose Christmas and New Year to propose.

Whilst this is usually good news for the parties involved, for trustees this may bring with it a potential headache for the future. There have been a great many cases, especially in the English Courts, whereby the Family Courts have attempted to attack trust settlements and make orders encouraging trustees to bend to the Courts view on how they should exercise their discretion for the benefit of the beneficiaries. This can inevitably lead to the trust assets being depleted and extensive costs being incurred with Trustees becoming embroiled in contested financial proceedings.

This perceived attack on trusts has been of immense concern to trustees, and those who have trusts in Jersey, and whether or not Jersey trusts can successfully defend attacks from overseas jurisdictions. The impact on divorce proceedings in overseas jurisdictions continues to be a hot topic, especially in light of the recent ruling in the case of Immerman v Immerman [2013] EWHC 3627 (Fam), where the English Court ignored the Royal Court’s request to limit disclosure provided to the beneficiaries by the trustees into the financial proceedings in England.

So how can the Trustees protect the potential invasion of the trust from overseas family Courts? One of the best ways of limiting the risk is for any beneficiaries who wish to get married to be asked to enter in a pre-nuptial agreement. Pre-nuptial agreements are now a standard part of protecting a family’s assets and, if prepared well, they are usually upheld by the courts. Whilst pre-nuptial agreements may be considered unromantic when insisted upon by the wealthier party (often being the one who has actually proposed!), it is less controversial if the insistence comes from the Trustees. Pre-nuptial agreements are akin to insurance policies, which are there in case they are needed but usually remain in the bottom draw collecting dust. However, the costs of entering into a well drafted pre-nuptial agreement will pale into insignificance in comparison to the costs of future contested divorce proceedings. Pre-nuptial agreements should therefore be considered as important as any other form of insurance, when considering asset protection strategies.

So, if you are aware of any beneficiaries who have proposed over the Christmas period, you should consider impressing upon them the importance of having a well draft prenuptial agreement put in place well before the nuptials.