Discretionary Trusts In A Marital Breakdown

Courts in common law jurisdictions continue to grapple with how to deal with a spouse's interest in a discretionary trust when there is a marital breakdown, and whether to include them in property division, and if included, how to value them in dividing family property.

There have been shifts by courts in common law countries over the years to include discretionary interests in trusts, while other jurisdictions, including many U.S. states, take a more conservative approach and exclude discretionary trust interests from matrimonial property division.

Under traditional trust law principles, a person with a discretionary interest in a trust is not considered to have an existing property interest. Instead, he or she is considered to have a mere "expectancy" because the trustee can choose whether or not to pay income or capital but is under no obligation to do so – like a birthday gift – and the traditional view is that such interests have little or no value.