The recent judgment handed down by the High Court in TP v TF (Matrimonialisation; Family Trusts; Fair Division) is compulsory reading for those with interests in family trusts.
Essentially, the High Court has ordered that a wife should receive a financial settlement on divorce of just over £120m, to include £114.5m from her husband’s trust assets worth some £378m.
The husband and wife are 63, married in 2001, and have two adult children. They separated in 2024. Both spent a total of £6.5m in legal fees in relation to this matter.
The main issue was in relation to the husband’s income from family trusts, some of which related to his career in a family business. The Judge queried if the husband could access a large part of his interest in the trust assets referable to his career in the business, were the trustees to agree, and found that, if requested, the trustees would advance the entire value of his interest in those particular trust assets available to him.
The Judge referred in particular to Section 25 of the Matrimonial Causes Act 1973 and reported that his first task was to “compute the wealth available to the parties for division between them. The overwhelming focus of dispute has been whether certain trust assets are capital resources available to the husband and if so, what is their value and do they constitute in whole or in part, matrimonial assets to which the sharing principle applies”.
Legal principles were considered including the test set out in Charman v Charman, that is, ‘… whether the trustee would be likely to advance the capital immediately or in the foreseeable future’.
The case centred on a letter from the trustees, stating that the trustees “would be minded to make available to the husband the vast majority, and potentially the entirety, of the value of CAP (CAP being the husband’s allocation of the trust for his work in the company over 30 years)”.
The Judge considered that the CAP trust’s purpose was and always has been to reward the husband for his efforts on behalf of the family, through the business, therefore allowing him to build up capital in the business, in excess of that which was otherwise notionally allocated to him in other family trust interests, solely by virtue of being the issue of his parents. Further, the husband was supported in those endeavours during the marriage by his wife, which support enabled him to perform that function and for which the trust allocation was his reward.
There were discussions over tax liabilities and the trust assets and debts to HMRC, both of which are accounted for in the sum awarded to be paid to the wife.
Key takeaways
Important points arise from this case:
- Solicitors (both specialist matrimonial and private client lawyers), wealth advisers, accountants, trust specialists, and trustees should be aware of the implications of this case;
- Prenuptial agreements and postnuptial agreements should be a firm consideration in all cases where family trusts are involved; and
- Accurate and meticulous completion of financial disclosure in Form E is always required. It is clear that the husband’s financial statement in Form E in this case indicated that the trusts were his resources. As such, the Judge was duty bound to consider them as part of consideration of Section 25 of the Matrimonial Causes Act 1973.
If you have any questions or concerns about family issues or mediation, please contact Family Partner Emma Harte.
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