How I Advise Clients on Structuring Valid Trusts Before and After Marriage

I am Peter Johnson, senior partner at Alexander JLO. Over many years I have worked with high net worth clients who ask how to use trusts legitimately to protect family wealth, preserve business continuity, and achieve estate planning goals without crossing the line into dishonest avoidance of matrimonial claims. Trusts can play a legitimate role before and after marriage, but their effectiveness depends on careful structuring, transparent documentation and timely professional advice. In this article I explain how I advise clients on creating and managing trusts that are legally robust, commercially justifiable and resilient to scrutiny in the family courts of England and Wales.

Why trusts matter to high net worth clients

Trusts offer features that attract families and business owners:

– They separate legal ownership from beneficial enjoyment so assets can be managed for future generations

– They can provide continuity for business assets and protect vulnerable beneficiaries

– They allow tailored governance through trustees, protectors and clear distributions rules

– They can support tax planning, succession and asset protection when used transparently and lawfully

However trusts do not create an automatic shield against claims on divorce. Family courts look to substance not form and will investigate beneficial entitlement, control and the purpose of transfers. I therefore advise clients to use trusts as part of a broader, documented plan that respects both tax law and family law obligations.

Legal principles the court applies to trusts in matrimonial cases

English family courts assess trusts under well established principles:

– Substance over form: the court looks at who benefits, who controls, and how value flows rather than only legal title

– Timing and intent: transfers into a trust made to defeat foreseeable claims or at the point of marital breakdown attract close scrutiny

– Beneficial interest: discretionary trusts that may confer benefit during the marriage can still count toward the matrimonial pot if the spouse enjoys practical access to benefit

– Traceability: courts use tracing and forensic accounting to follow funds into and out of trusts and to identify real economic benefit

I advise clients in light of these principles. The clearer the commercial or family purpose for a trust and the more documentary support for that purpose, the greater the prospect that a trust will be respected.

When a trust is likely to be treated as a matrimonial asset

Courts are alert to circumstances in which trust assets effectively serve the spouse despite legal separation. Common indicators that lead a court to treat trust assets as available include:

– The settlor retains ongoing control as trustee, protector or through powers of appointment

– The settlor or spouse receives direct distributions, loans, or regular benefits from the trust during the marriage

– The trust was funded with marital assets or with funds that were derived from the marriage

– The trust was created shortly before separation or in response to a known dispute

I counsel clients to avoid actions that create these indicators without clear, contemporaneous justification. Where such features exist I prepare contemporaneous evidence of commercial or family reasons for the structure and document any independent advice obtained.

Pre-marital trusts — benefits and best practice

Why clients use pre-marital trusts

Clients often choose to settle assets into trusts before marriage for reasons such as:

– Protecting family wealth that derives from a previous relationship or family business

– Ensuring inheritances reach intended beneficiaries such as children from an earlier marriage

– Maintaining business continuity by separating family capital from operational ownership

– Achieving long term succession planning with clear governance

How I structure pre-marital trusts to be defensible

1. Create the trust well before marriage

Timing matters. The longer the trust operates before marriage the stronger the evidence that the arrangement was not designed to defeat future matrimonial claims. I recommend establishing a clear interval between settlement and marriage and documenting the reasons for the trust at the time of creation.

2. Use independent trustees and objective governance

Independent trustees with clear fiduciary duties reduce perceptions of settlor control. I favour trustee boards that include professional corporate trustees or independent family office trustees who evidence arms length decision making.

3. Document the source of funds and contemporaneous advice

I obtain and preserve bank transfer records, letters from family members who provided funds, and signed statements from advisers. Contemporaneous solicitor and tax adviser letters showing independent advice add credibility.

4. Set clear protective provisions and beneficiary criteria

Draft trust deeds that define beneficiary classes, distributions triggers and clear mechanisms for dealing with family events. Avoid ambiguous discretionary powers that invite later argument about settlor influence.

5. Use protective but transparent terms for business assets

If the trust holds shares in a trading company craft articles and shareholder agreements that permit the business to operate efficiently while protecting the trust’s capital. Explain commercial reasons for trustee oversight rather than personal control.

6. Consider recognition of marital agreements

Where parties have discussed asset division a pre-nuptial or post-nuptial agreement that recognises the trust can bolster its standing. Such agreements do not remove disclosure obligations but they provide a contractual context that the court may value.

Post-marital trusts — when they make sense and when they risk failure

Why clients create trusts after marriage

Post-marital trusts can be appropriate for many reasons:

– Reorganising family assets after business sale, inheritance, or gift

– Protecting young beneficiaries or structuring long term charitable giving

– Formalising arrangements after a change in family circumstances such as incapacity or remarriage

Risks of post-marital trusts

Trusts created during marriage attract closer scrutiny. The court asks why the trust was needed and whether it affects matrimonial claims. I therefore advise caution and full documentation where clients contemplate post-marital settlements.

How I advise on post-marital trust structure

1. Ensure independent advice for all interested parties

The presence of independent legal and financial advice for the settlor and for materially affected beneficiaries or spouses reduces the risk that a court will find the trust unfair or coercive.

2. Establish clear commercial or family purpose

When a trust follows a business transaction, inheritance or sale I insist on documentary evidence of the transaction and contemporaneous professional advice. Commercial justification, such as creditor protection or regulatory compliance, supports legitimacy.

3. Avoid immediate disposition of marital assets into a trust without disclosure

Transferring assets that form part of the matrimonial pot into a trust to avoid claims is risky. Where an asset arises from the marriage I recommend full disclosure to the spouse and consideration of settlement alternatives such as formal agreements, security, or equalisation transfers.

4. Consider a post-nuptial agreement where appropriate

A post-nup that records the parties’ intentions and shows independent advice may support the trust’s treatment. Again the court will weigh fairness and may intervene if the agreement leaves a spouse inadequately provided for.

5. Use trustee independence to show separation of control

Post-marital trusts benefit from clear separation between settlor and trustee functions. Where the settlor remains a trustee I advise limiting powers and recording trustee deliberations to evidence independent decision making.

Trust documentation and governance — the paperwork that matters

What judges and advisers expect to see

The robustness of a trust often rests on the quality of documentation. I ensure clients have:

– A well drafted trust deed that states purpose, beneficiaries, trustee powers and procedures

– Minutes of trustee meetings that demonstrate independent governance and decision making

– Trustee resolutions and distribution records that show proper exercise of discretion

– Letters of wishes that express settlor intent without conferring binding control on the settlor

– Financial records, bank statements and accounts maintained in the trust’s name or by an authorised nominee

– Independent trustee reports where professional trustees carry out periodic reviews

Regular governance prevents later arguments that trustees acted as mere instruments of the settlor.

Tax and regulatory considerations — get specialist advice early

Trusts interact with tax regimes and regulatory obligations that vary with domicile, residence and asset type. I always coordinate trust structuring with tax advisers on:

– Inheritance tax exposure and available reliefs

– Income tax and capital gains tax implications for distributions and asset realisations

– Reporting obligations under the Common Reporting Standard, FATCA and UK anti-money laundering rules

– Trust registration and disclosure requirements under the Trust Registration Service and other statutory regimes

A failure to address tax or reporting can undermine the trust’s legal standing and expose clients to significant penalties.

Disclosure obligations on divorce — Form E and trusts

Full and frank disclosure governs matrimonial proceedings. Trusts do not remove that duty. When preparing Form E I ensure clients:

– Disclose their relationship to any trust: settlor, trustee, protector, beneficiary or potential beneficiary

– Provide trust deeds, settlement documents, trustee minutes and distribution history as directed by the court

– Explain provenance of funds used to settle trusts with documentary evidence such as bank transfers and adviser letters

– Provide statements explaining trustee independence and the practical availability of trust assets

I emphasise that transparency with counsel aids defence of a trust’s legitimate purpose. Concealment or evasive behaviour commonly triggers forensic scrutiny and adverse findings.

How courts treat discretionary trusts and power structures

Discretionary trusts present particular complexity because beneficiaries do not have fixed entitlements. Courts examine:

– The likelihood of distributions to the spouse given the trust’s history and trustee practice

– Controls retained by the settlor such as appointment powers, stepdown trustee mechanisms, or family office influence

– Whether the trust was funded with marital assets or with independent family wealth

Where discretionary distribution is realistic the court may consider the trust in capital calculations, either by recognising potential benefit or by treating the trust as a resource available for meeting needs.

Practical steps to enhance the resilience of a trust to matrimonial scrutiny

If you wish to create or maintain a trust that will withstand family court scrutiny consider these practical steps I use with clients:

1. Use independent professional trustees or mixed trustee boards

Incorporating professional or independent trustees demonstrates arms length governance and reduces perceptions of settlor domination.

2. Obtain contemporaneous independent legal and tax advice

Documented advice at the point of creation and at major trust events helps to show commercial or family reasons rather than avoidance motives.

3. Avoid rapid transfers near marital breakdown

Transfers made shortly before separation look suspicious. If transfers are necessary for clear commercial reasons record the rationale and obtain independent verification.

4. Keep robust records and produce clear minutes

Trustee minutes that record deliberations, conflicts of interest, and reasons for distributions present persuasive evidence of proper governance.

5. Preserve evidence of provenance and family contributions

If trust capital derives from family wealth gather wills, gift letters, inheritance documentation and early bank records to prove the source.

6. Consider nuptial agreements that reference the trust

Where appropriate a pre-nuptial or post-nuptial agreement that recognises the trust and records disclosure can strengthen the argument that the trust allocation has been considered by both parties.

When to use trusts and when to choose alternative tools

Trusts suit long term succession, minority protection and complex family arrangements. But trusteeship is not the only tool. Alternatives include:

– Shareholder agreements and bespoke articles to preserve business control and cash flow without transferring beneficial ownership

– Family investment companies that provide controlled shareholder structures with clear commercial governance

– Pre-nuptial agreements and structured settlements that allocate marital claims without complex trust mechanics

– Insurance wrappers and pension structuring that achieve particular income replacement goals

I weigh the benefits and downsides in each case and recommend hybrid solutions that balance protection, simplicity and transparency.

Case examples — anonymised and illustrative

Example 1: pre-marital family settlement recognised

A client settled family capital into a discretionary trust ten years before marriage. Trustees were independent, distributions rarely favoured the settlor’s household, and contemporaneous adviser letters documented the family’s succession plan. On divorce the court accepted the trust as separate property because evidence showed long standing independence and no marital funding.

Example 2: post-marital trust challenged and adjusted

A trust created after a business sale and funded partially with marital proceeds faced challenge. Forensic tracing revealed mixed funding and the court treated a proportion of the trust as part of the matrimonial pot. The outcome demonstrated that timing and provenance are decisive factors.

Final reflections — trust with purpose not secrecy

Trusts remain a powerful tool for families and business owners when used for legitimate purposes and supported by strong documentation, independent governance and timely professional advice. If you plan to use trusts before or after marriage seek specialist legal, tax and trustee advice early. Disclosure and transparency do not undermine valid planning; they protect it by creating a documented, credible record that the family courts will respect.

If you would like a confidential discussion about trust structuring, succession planning or how to prepare robust disclosure in case of relationship breakdown, we can arrange a focused review that maps risks, recommends governance changes and coordinates the advisers you need to implement a resilient plan.

Alexander JLO Solicitors are well aware that going through divorce can be very difficult. Whilst the implementation of no-fault divorce back in 2022 has made the legal process much simpler, there are times, especially in relation to financial matters, when input from an experienced solicitor is vital.

With that in mind we have developed a revolutionary new service which will ascertain whether or not it’s wise to have legal advice on finances when going through divorce. Simply called Form Easy it will assess your level and type of assets and determine if you qualify for a free, no-obligation consultation to discuss your case with us and decide on the best ways forward for you. Simply click the Form Easy button, or visit the page here, answer a few short questions and we will let you have our input on whether we can help. 

At Alexander JLO we have many years of experience of dealing with all aspects of family law and will be happy to discuss your case in a free no obligation consultation. Why not call us on +44 (0)20 7537 7000, email us at info@london-law.co.uk or get in touch via the contact us button and see what we can do for you?

This blog was prepared by Peter Johnson on 29th November 2025 and is correct at the time of going to press. With over forty years of experience in almost all areas of law Peter is happy to assist with any legal issue that you have. He is widely regarded as one of London’s leading divorce lawyers. His profile on the independent Review Solicitor website can be found Here.

To follow up on any of the above please contact Guy Wilton of our family department. Guy has wide experience of acting for the firm’s clients, their family and their businesses. Guy’s experience as a lawyer started in the Northern and Welsh Circuits, including the Liverpool Courts, where he represented numerous clients after being called to the Bar, before opting to join Alexander JLO in 2017 and qualifying as a solicitor in 2024. He is a highly experienced family lawyer with a particular interest in financial remedy proceedings and child contact disputes.

Guy’s profile on the independent Review Solicitor website can be viewed here.