By Janice Callander, Director, Private Wealth at IQ-EQ; Amy Benest, Partner at Baker & Partners; and Sam Longworth, Partner, Divorce and Family at Stewarts LLP
Trusts can provide effective asset protection in divorce, but not in all circumstances. Courts look closely at timing, intent and the real-world use of trust assets. Outcomes often depend on whether the court considers your trust a marital asset. For ultra-high-net-worth (UHNW) families, early planning and transparent governance are critical to preserving wealth through divorce.
Divorce may be increasingly common, but disputes over money are only growing more complex. Recent Ministry of Justice data shows that financial battles in divorce are at a 15-year high, even as overall divorce rates decline, driven in part by a rise in high-net-worth cases. As a result, asset protection provisions within wealth structures are being tested more rigorously than ever before.
Many families ask if placing assets into a trust will automatically shield them from divorce claims. The reality is more nuanced, and highly dependent on context. For families with significant wealth, the question is not whether divorce should factor into long-term planning, but how well existing structures might stand up if personal relationships break down.
Timing and intention: The foundation of effective protection
Trusts can play a powerful role in asset protection, but their effectiveness depends largely on when and why they are established. Structures put in place as part of a long-term, neutral planning process are generally more robust than those created in anticipation of a specific event.
Jersey trusts, supported by a strong legal framework and a Royal Court with extensive experience in trust matters, have a well-established record of resisting challenges. But even in Jersey, courts will look closely at timing, intention and behaviour. How the trust was drafted, how its assets have been used, and who has benefited from those assets all matter.
Where a trust is created or funded during the lead-up to a divorce, scrutiny is inevitable. In many cases, advisers may recommend waiting until divorce proceedings are concluded before implementing new structures. While this may be an imperfect solution, it’s an effective way to avoid compounding risk.
How trust assets are viewed in divorce proceedings
A critical question in any divorce involving trust assets is whether those assets are treated as a resource of the marriage. Courts will consider not only the settlor’s stated intentions, but also how the trust has operated in practice.
Sometimes the assessment is relatively straightforward; for example, where trust distributions have regularly funded school fees or day-to-day living expenses. In other cases, it’s more complex – particularly where business interests sit within a trust, or where trustees have exercised discretion in ways that benefit one spouse more than another.
Coherence is the most important consideration. Inconsistency between a trust’s stated intention and its outcome can open the door to vulnerability.
Jurisdictional oversight and the trustee’s role
High-profile English cases such as White v White, Miller/McFarlane and more recently Standish have reinforced London’s reputation as the “divorce capital of the world,” with the courts of the Family Division of England holding a wide remit to adjust the wealth of the divorcing parties as they see fit.
However, for Jersey proper law trusts, supervisory jurisdiction ultimately rests with the Royal Court of Jersey. Jersey trustees are not bound automatically by foreign court orders and must consider the interests of all beneficiaries, not just the divorcing spouses – looking beyond the divorce and considering wider fiduciary concerns.
This is particularly pertinent in relation to maintaining beneficiaries’ confidentiality. Foreign courts may order disclosure relating to trusts, but Jersey trustees often have the option to seek direction from the Royal Court, particularly where a trust instrument may contain restrictions on disclosures.
When trusts are involved in divorce proceedings, the initial actions and decisions are crucial. Assessing early on how trust assets may be treated in the divorce helps trustees respond confidently to disclosure requests. While courts may require information about the trust, the assets themselves are unlikely to be directly targeted or put at risk for other beneficiaries. This approach reassures trustees that cooperating with appropriate disclosures carries minimal risk of being drawn into proceedings in another jurisdiction.
Transparency and avoiding escalation
Depending on the circumstances of each trust, it often can be preferable for the trustee to disclose information voluntarily to the involved parties rather than having to consider whether to submit to a foreign court’s jurisdiction. This would usually include consideration of what consultation there should be with the other trust beneficiaries and any settlor/protector, particularly where one of the divorcing parties is not a beneficiary and therefore disclosure would entail sharing confidential information with a ‘stranger’ to the trust.
The extent to which trustees should engage with divorce proceedings without the governing court’s approval depends on each case. However, sharing information with a beneficiary who is already entitled to it typically does not require court involvement – though legal advice should always be sought.
Trust disputes often become contentious because one party doesn’t fully understand the structure. Trustees who provide adequate transparency, answer questions clearly, and explain the rationale behind decisions can significantly reduce the risk of costly court involvement.
Of course, trustees must act in the best interests of all beneficiaries throughout their mandate. When the beneficial class extends beyond the divorcing couple, and particularly when children are involved, lengthy litigation can be financially and emotionally damaging, diminishing trust assets for everyone.
Firewalls and forward planning
Well-advised families increasingly recognise that asset protection should be addressed well before personal relationships come under strain. Contingency planning, including the use of trust “firewalls” and jurisdiction-specific protections, plays an important role – but only when combined with proportionality and fairness.
As wealth grows and diversifies, it may make sense to separate assets across different structures, especially where core business interests are involved. This can limit the commercial impact of a dispute and smooth operational continuity.
Prenuptial planning: A sensitive but necessary conversation
Pre- and post-nuptial agreements can reinforce the integrity of trusts when properly drafted and supported by full disclosure and independent legal advice. Courts are more likely to uphold these agreements when they are proportionate and entered into with transparency on all sides. For many families, trustees can play a valuable role in initiating these conversations and working alongside family lawyers to frame them sensitively. While these early plans can be uncomfortable, avoidance rarely improves the final outcome.
A balanced approach to asset protection
Ultimately, effective asset protection during divorce hinges on credibility. Structures that are perceived as reasonable, transparent and fairly administered are more likely to withstand scrutiny than those designed to exclude or conceal. Courts will examine whether each party understood what they were agreeing to, whether advice was taken, and whether circumstances have changed materially since that time. Meeting those standards is the best way to ensure that asset protection structures are respected if a marriage dissolves.
How we can help
Divorce places unique strain on wealth structures, trustees and families alike. Navigating these moments requires not only technical expertise, but also sound judgement, defensible proportionality and an understanding of human dynamics.
IQ-EQ’s Private Wealth team in Jersey works alongside UHNW families, advisers and family offices to support resilient structuring and pragmatic decision-making at every stage, helping ensure that the structures designed to protect your wealth also protect your relationships.
Contact our team today to discuss how we can help protect your assets and ensure responsible trust governance.
