In a recent case, the Supreme Court of Appeal established (say in a divorce) the factors which needed to be taken into account to determine whether the assets in the trust should be considered to form part of the husband’s assets:
- The timing of the creation of the trust and donation. The SCA confirmed the importance of this requirement and found that the creation of the trust so close to the divorce was a strong indication that the trust was set up to frustrate the accrual claim.
- The location of the trust. The trust was established offshore, making it more difficult and expensive for the wife to seek to recover assets from the trust, effectively trying to put the trust out of the wife’s reach.
- No consultation beforehand. Given that the parties had a history of consultation on major financial matters and given that the trust was apparently set up for the maintenance of their minor child, the absence of consultation about the creation of the trust stood at odds with the trust having a legitimate purpose.
- No immediate need for the trust. The husband had purported to create the trust for the maintenance of his minor child. This argument was confounded by the fact that he was in any case responsible for the maintenance of his child.
To summarise. Yes, our courts can pierce the veneer of a trust and include assets in the trust in the calculation of accrual at divorce. Does this mean that in all instances this will happen. Absolutely not, as this would thwart the purpose of a trust as a legitimate estate planning tool. Whether the veneer should be pierced and whether the trust form was abused to prejudice the claims of the other spouse will depend on the circumstances of each case and require careful consideration of the relevant factors applicable to the creation and use of the trust.
[Jan]
