Can I still get income from a business owned by a trust, after separation?

A couple which have been married 12 years ago, have recently separated.  During the marriage, the main source of income which the parties relied on was from a business.  The business was established shortly before the parties were married, and the shares of the business were transferred to a Trust so as to protect the parties from future business creditors.  The wife is the sole trustee and beneficiary of the Trust, but both parties worked in the business.  After the parties separated, the husband wanted to know if he was entitled to any income from the business.

Section 182 of the Family Proceedings Act allows the Court to make orders in relation to “nuptial settlements”, but only after the marriage is dissolved (the parties have to be separated for at least 2 years before a marriage can be dissolved).  It might be necessary to therefore make an application for spousal maintenance in the meantime.  The definition of a nuptial settlement is not in legislation but common law informs us that a nuptial settlement will usually encompass trusts created during a marriage or civil union, and can also include trusts settled in contemplation of marriage.  If a Court finds that a particular trust is a nuptial settlement, it can then investigate whether, as a result of the marriage breaking down, one of the parties’ expectations of provision from the trust has been defeated.  The court could then make orders to remedy that loss of expectation. 

The orders the Court is likely to make will depend on the length of the marriage, when the trust was settled, the original source of the assets, the contributions from either or both parties to the trust property, and the interests of the parties’ children. 

In 2016 the Supreme Court decided a similar case, Clayton v Clayton.  In that case a lengthy marriage broke down and most of the parties’ assets – built up over the course of their marriage – were held in trust.  The parties eventually settled out of Court but the Supreme Court’s judgement was that it would have resettled the nuptial settlement in question equally on two new ‘his and hers’ trusts. 

This will not always happen when a marriage breaks down, and in some cases (for example, when a trust was an inheritance trust settled by a parent) the Court has refused to make orders. 

In the situation above, the parties eventually agreed that the husband had a reasonable expectation that the trust would continue to provide him with some level of financial support.  The parties accepted that a Court could make an order that the trust be varied or assets resettled to ensure that the husband continues to be provided for even after the marriage has ended.  Subsequently, the parties agreed that the husband would get a larger share of the family home, to compensate him for his lost expectation of support from the trust.   

If you are in the husband’s position, you should know that the just because assets are owned by a trust, does not always prevent you from accessing them.  You should seek legal advice if your marital assets are in trust and your marriage has broken down.