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General, Relationship Property, s. 182

Jurisidiction, divorce and trusts

Jurisdictional issues involving trusts are common in a tax context due to trusts being variously tax-resident in one jurisdiction or another depending on the residence of trustees and settlors.  Due to the mobility of settlors and trustees trusts can be resident in more than one jurisdiction with, at times, significant tax consequences.

However, until recently the jurisdictional boundaries of section 182 (a provision of the Family Proceedings Act enjoying somewhat of a renaissance at present that gives the court the discretion to review ante- and post-nuptial settlements onto trusts following divorce) had not warranted significant consideration. By way of back ground this section allows the the court to re-visit trust settlements if it finds that that the parties’ expectations are effectively thwarted by the marriage ending. The court then has the discretion to order the trustees to transfer property for the benefit of one or both parties and / or the parties’ children.

Controversially, although the application of the section has been extended to apply to civil union partners, it does not apply to de facto partners.

A recently exposed jurisdictional fish hook in this section relates to where the parties are divorced.  Simply put, if the parties obtain a divorce overseas it may not be possible for one of the parties to bring an application under s.182 (regardless of where the trust is resident).  The reason for this is that the section is predicated on the divorce being granted under that Act, not where the trust is resident and the fact that the parties are divorced.  While there may be avenues to address this seeming inequity, until these are confirmed, the jurisdictional boundaries to s. 182 applications present both opportunity and threat for some parties.

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