“Protecting” Assets Through a Discretionary Trust in Anticipation of Divorce

Abstract

This paper addresses a dilemma faced by South African courts relating to the status of assets held in a trust of which one of the parties to a marriage is a trustee. The general rule is that trust property shall not form part of the personal estate of the trustee, except in so far as he or she, as the beneficiary, is entitled to it. This paper illustrates the possible prejudicial effect to vulnerable spouses of strictly applying trust-legal principles when deciding divorce matters. The article submits that courts should objectively assess the facts of the cases before them to determine whether the assets held in a trust would have been part of the trustee’s personal estate had there been no trust created. If the answer is “yes”, then such assets, depending on the marital regime, should be divided between the parties on divorce.