My Spouse Can’t Touch My Assets! They Are In A Trust
In March 2017, the Supreme Court of Appeal (SCA) dealt with the question as to whether the value of certain assets of a trust may be taken into account when determining the spouse’s accrual claim.
The aim of this article is to give a short and simple explanation as to how the courts are viewing alter ego trust. An alter ego trust is where it can be shown that assets, seemingly belonging to the trust were in fact the property of the trustee in question. In other words, the trust was merely the trustees alter ego. Now, a spouse can ‘pierce the veil’ of a trust which is the alter ego of the trust founder or trustee, and the asset values of such trust may now be taken into account in marriages that are subject to the accrual system.
In order to have the trust assets taken into account when determining the accrual claim, the first step is to prove that the trust is merely the alter ego of one of the spouses. To find out if a spouse was merely using a trust as his alter ego, the courts would look at the “control test”. The question to ask is whether the spouse gave limited regard to the difference between the trust assets and his own assets, and if the spouse violated the ‘core idea’ of a trust, which is to maintain a separation between the control of trust property and the enjoyment of the benefits derived from such control.
The next step is to determine whether the applicable matrimonial property regime imposes an obligation on the divorcing spouses. The courts found that in marriages involving the accrual system, where a trustee-spouse transfers personal assets into a trust and deals with the assets as if they were trust assets in a fraudulent or dishonest attempt to conceal the ‘personal’ assets and in doing so prejudices the aggrieved spouse’s accrual claim. Then In these circumstances, trust assets can be taken as the personal assets and taken into account with calculating the value of the accrual claim.
Spouses must be careful of placing all their assets in trust, if a spouse has used a trust in a dishonest or unconscionable manner to evade a liability or avoid an obligation then the other spouse will have a remedy.