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Philip Barnsley  

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Wealthy parents could be hit in the pocket after latest court ruling

 

Article date:  10/12/2009

A recent family court decision could have worrying implications for wealthy parents and those in line to benefit from family trusts, according to a leading family law specialist.

The head of Higgs & Sons' family department, Philip Barnsley, says the case of SR v CR, where separated parties were unable to reach an agreement on how to split assets valued up to £7.88m could have implications for other family cases.

The couple asserted that these assets were inadequate to maintain a lifestyle of the standard to which they were accustomed, which was costing approximately £1 million annually.

However, the husband was a beneficiary under a number of offshore discretionary trusts with a value of $170m endowed by his father and had received support from these, and from his father, for a number of years.

On appeal, the High Court included the trusts as a resource available to the husband and ordered that the husband pay his wife a total of £6.25m.

Philip Barnsley explained: "The court was persuaded that, given a history of the previous payments to the husband, it was likely that the trustees would exercise their discretion and make further capital available to him.

"The trustees gave evidence that a debt of the husband's failed property business to the trusts (£1m) would be taken off his apportionment and that he might be provided with rented accommodation and a modest living allowance. Further, the trustees stated that they must have regard to his father's wishes, that he was not prepared to give his son more money and would oppose any distribution to him from the trusts.

"The court found that the husband had a reasonable expectation of further capital advances from the trust in the short to medium term and, as he would expect to receive his share of the trust when his father died, it was therefore a resource which the court should take into account."

Mr Barnsley concluded: "This case highlights the need for trustees to employ great caution in the manner in which they exercise their discretion under these kinds of trusts.

"However, the husband's father was no doubt pleased that he had set up the offshore discretionary trusts in the first place, as these did act to protect the principal sums within them from these proceedings."

To find out more contact Philip Barnsley, partner and head of family law team at Higgs & Sons on 01384 364148 or e-mail philip.barnsley@higgsandsons.co.uk.

Higgs & Sons is one of the largest law firms in the region.  The firm has recently announced it is to move its 170-strong team to state of the art new premises at 3 The Waterfront, Brierley Hill.

Notes to editors: full case reference is SR v CR (Ancillary Relief: Family Trusts) [2008] EWHC 2329 (Fam).

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