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What can the courts do when trusts cause problems?

If a partner has moved property to a trust, it may mean that the other partner’s rights to that property under the Property (Relationships) Act 1976 will disappear. In those cases, the Act gives the court powers to get property back from the trustees.

If the court finds that a partner moved the property to the trust deliberately intending to defeat the other partner’s rights, the court can order that the trustees give the property back. The court may require the partners to share that property equally if they separate or if one partner dies.

If the court finds that the partner did not intend to defeat the rights of the other partner, but by moving the property the transaction has had that effect, the court can order the partner to pay compensation to the other. But the court does not have power to order that the trustees give the property back.

There are also remedies under other laws. Under the divorce legislation, the court has power to vary trusts connected to a marriage. The courts have said that it is appropriate to vary trusts when what the spouses could reasonably expect from the trust changes because of the separation. This power to vary trusts is much wider than the remedies in the Property (Relationships) Act 1976.

Sometimes the courts have said that a partner should have a property interest in a trust even if they are not a beneficiary. The court will sometimes do this because of the work the partner did on the trust property, and because the partner thought he or she would get an interest.

The main problem with all these remedies is that they are under different laws. That means if a trust causes problems when a relationship ends, a partner might have to make several claims to the court. The procedure can be complex and expensive.

The different remedies also clash with one another. Some give the court wide powers, whereas some do not.

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