Divorce: what happens when our home is owned by a trust?


My wife and I are getting divorced and are disclosing what assets we have. In the process, I have discovered that the family home is not owned by my wife, as I believed, but by a trust of which I am not a beneficiary. Does this mean I will not get my fair share of the value of the property?

On divorce both parties need to disclose all their financial resources, and this includes trust interests — whether located in the UK or offshore. Then the settlement pot can be divided fairly by the court.

However, since your home is owned through a trust, then it may not be treated by the court in the same way as if it were owned solely in your wife’s name.

How do I find out if that is the case?

You should request to see the trust deed to ascertain the type of trust and the nature of your wife’s interest in it. You would need to find out both when the trust was created and also when the property was first put into it. For example, was the trust created before you came on to the scene? Or was it created at a later date, either during your marriage or “in contemplation” of it?

Why does this matter?

This matters because it will affect the way the court deals with the trust — for example, the court may have the power to vary it or disregard it altogether. If the court finds that a trust is nuptial, the court can vary the trust to provide a benefit for a spouse and/or any children of the family. A “nuptial” element means that the trust is connected to you both in your capacity as spouses or was created in contemplation of your marriage.

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A court may disregard a trust altogether if it is a sham — in other words that your wife never intended to transfer the ownership of the property to the trustees and there was an intention to mislead third parties.

What if the property was put into the trust before we met? Does that mean I can’t get my hands on it? 

Even if you cannot demonstrate that the trust has a nuptial element or is a sham, the court may treat your wife’s interest in it as a financial resource available to her, which will be taken into account in determining the financial settlement between you.

It may be that the trustees need to become a party in the divorce and the court may frame orders to provide “judicious encouragement” to get them to do so.

I think the trust is based outside the UK — does that matter?

The enforceability of an English court order will depend on the approach to trusts in the jurisdiction in question and where the underlying assets are located.

Naomi O’Higgins is a partner in the trusts and estates disputes team at Howard Kennedy

Holding back payment

We are having an extension put on the side of our house and are coming to the end of the project. Our builder is pushing us to pay the last instalments, but we have been told we should withhold some of the money in case there are any snags — loose wires, chipped surfaces and the like. What should we do?

You are quite right to be concerned about snagging. Snags are an inevitable part of any building project. While most are relatively minor, they should be rectified by your builder.

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But you can only withhold money from your builders if your contract permits it: either through the agreed timing and amount of staged payments, or by explicitly mentioning a retention of part of the fee. If it does not, withholding money is likely to constitute a breach of contract and may cause the builder to suspend further works pending receipt of full payment, and to claim interest. They could even start legal proceedings to claim any unpaid sums. If your contract does not specify what sums are to be paid and when, then it would be sensible to agree a programme of payments now, with an amount held back for snagging. You should record the agreement in writing.

What sort of percentage should we hold back?

People typically set aside a retention of 5-10 per cent to incentivise the builder to complete the works. Half of this is typically paid when they finish, and the remaining half is paid upon receipt of the building control certificate, or following the completion of any snagging issues, or after an agreed period of time has elapsed.

OK great. What if we do not receive building control certificate?

Unless the contract says a building control certificate needs to be provided, then your builder will not need to. If it does, and the builder refuses to provide the relevant paperwork, you may have to apply to court to get it. That said, it may also be possible to obtain a building control completion certificate from the local authority or the approved inspector if the process was handled by them.

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Kieran Fano is a senior solicitor in the construction team at Goodman Derrick LLP, a London law firm

The legal issues discussed in this column refer to England and Wales. Scenarios have been compiled for illustrative purposes

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