Background:
It is clear that a well drafted and properly administered trust
can be an effective asset protection vehicle in the context of
divorce. Broadly the test now applied by the Family Division of
England and Wales (the "Family
Division") in relation to trusts is to decide whether
the trust should be treated as a resource available to the relevant
party – for example, if the husband were to request the
trustee to advance to him the whole (or part) of the trust fund of
the trust, the trustee would be likely to do so (the
"Charman Likelihood Test").
Obviously this test raises some interesting issues for trust
counsel to consider in the drafting of trusts and letters of
wishes. The test also raises some key points for trustees to
consider in the practical administration of trusts, notably
concerning the need for trustees to exercise their own independent
discretion (distinct from direction or influence from the
beneficiary / settlor spouse) and, fundamentally,
