A High Net Worth Divorce & Family Trust Saga (Part 1)

The marriage, the trust, and the family home

As is common, the marriage involved children from previous relationships as well as a child from the marriage.

Also, commonly, the marriage involved the husband being the breadwinner and the wife being the homemaker.

Not so common, the marriage involved the husband amassing substantial wealth and settling almost the entirety of that wealth within an offshore trust for the benefit of himself, his wife, and his children (including his children from a previous marriage) (the “Trust”).

An important aspect of the terms of the Trust was that they did not identify the wife by her name. The terms of the Trust identified the settlor by his name, and a schedule to the Trust identified the beneficiaries as (i) the settlor, (ii) the settlor’s spouse, and (iii) the settlor’s children and remoter issue. The wife’s status as a beneficiary was linked to her status as the settlor’s spouse, which raised issues down the line during the divorce and ancillaries because a Decree Absolute could change her status from a spouse to no longer being a spouse. There were also concerns that the wife’s status as a wife/beneficiary could be affected should the settlor decease, particularly as there were health concerns, wherein the wife would become the settlor’s widow.

The marriage was a long one. The husband was in his sixties and the wife was in her forties when they married. The husband filed his divorce petition when he was in his eighties and the wife was in her sixties.

The Trust was a Jersey law trust administered originally by professional trustees based in Jersey, following which there was a transfer of trusteeship to a private trust company (“PTC”) which was owned by a purpose trust established by the husband. The PTC was situated in Jersey, with the husband and a close friend being the original directors of the PTC. Following legal advice, the husband stepped down from the board of directors around the time of commencing divorce proceedings. The husband was replaced by another long-term associate and a professional trustee.

In this instance, the husband’s divorce petition was issued in Jersey where the married couple had resided for a few years having moved offshore elsewhere around twenty years earlier. The matrimonial home situated in Jersey was an asset held by the Trust. The husband had acquired permission to reside in Jersey because of links with one or more of his companies, which did business in Jersey. By extension, the wife could live in the matrimonial home with her husband.

When the husband, through his lawyers, gave notice to his wife of his intention to petition for divorce, notice was also given of the intention to evict the wife from the matrimonial home as she could not reside there without him. Following correspondence from us, the wife had an extended grace period to remain in the matrimonial home permitted by the Population Office and the trustee, following which the wife was forced to leave the matrimonial home and take up residency in England.

Maintenance and legal fees

At the outset, it was agreed, after some pressure by the wife, that the wife’s legal fees and maintenance pending suit would be covered from the Trust. A portion of the maintenance was attributed to the husband and the balance, together with legal fees, was provided by way of loans. The trustee was provided with redacted bills for legal fees, to preserve privilege between the wife and her advisers. It was an important staging post for the wife to have issues over maintenance and legal fees resolved, particularly as initially she found herself in a position (unlike the husband) with no home, no income, and no way to fund her legal costs.

The delegate

Shortly after filing his divorce petition, the husband lost capacity and a long-standing business associate and friend was appointed through the Capacity Court as his delegate.

The matrimonial property

A core issue within the Family Proceedings concerned the assets settled into the Trust, and the extent to which some or all those assets could be considered matrimonial property which ought to be taken into account when assessing the pair’s finances in respect of any ancillary relief award.

During early discussions between the husband and the wife, and the trustee, an early indication of the value of the Trust was put at circa £30 million. An important step for the wife, who had had few dealings with the family’s finances, was to satisfy herself as to the value of the Trust. A highly trusted trust professional with an accountancy background was instructed through us on behalf of the wife to examine the Trust’s finances. This led to informal valuations for the Trust being approximately double what had been said at the outset. The informal valuations were important, and were largely agreed and achieved at minimal expense.

The Family Court, at a directions hearing, referred to the Trust having “a value of some £55 to £61 million” and the husband’s assertion was that most of this should not be considered matrimonial property “because it reflects the sale of the [husband’s] business in 1988 [pre-marriage] for approximately £18.5 million, which, adjusted for cost of living purposes to 2021, gives a figure of approximately £50.3 million”.

Accordingly, the Family Court identified as an issue between the parties and which it would have to deal with, “what, if any, proportion of the assets of the [Trust] falls to be discounted as pre-matrimonial property.”

Similarly, the Family Court identified that another issue to be resolved or decided was the value of assets within the Trust which were not pre-matrimonial property – ie what was the value of the ‘matrimonial property’ within the Trust.