Variation of Nuptial Settlements on Divorce: MCA 1973 s24(1)(c)
On divorce, the court can vary any trust that qualifies as a nuptial settlement — redirecting assets, removing an ex-spouse as beneficiary, or collapsing the trust entirely. Estate planning must anticipate this risk.
Key Points
Broad definition
A nuptial settlement includes any trust made in connection with or in consideration of the marriage — not just formal ante-nuptial settlements.
Court has wide powers
The court can vary terms, remove the spouse as beneficiary or trustee, redirect capital to children, or collapse the trust.
No consent needed
Unlike a deed of variation, s24(1)(c) is a court order imposed on divorce — no trustee or beneficiary consent required.
Drafting can reduce risk
Using a wide discretionary trust without spouse-centric language reduces the risk of a trust being characterised as a nuptial settlement.
Frequently Asked Questions
What is a nuptial settlement for the purposes of MCA 1973 s24(1)(c)?
A nuptial settlement under section 24(1)(c) Matrimonial Causes Act 1973 is broadly defined — it is any settlement made on the parties to the marriage or civil partnership in their capacity as spouses. The concept extends well beyond the formal ante-nuptial settlement of older estate practice. It includes: (1) trusts set up specifically in connection with the marriage, such as settlements on the couple as part of a pre-nuptial arrangement; (2) lifetime trusts that were expressly made to benefit both spouses jointly, particularly where the trust document refers to them as a couple; (3) any settlement that provided a benefit to both parties as a result of and in recognition of the marital relationship. The test is whether the settlement was made 'for or in consideration of' the marriage. A settlement made entirely independently of the marriage — for example, a trust set up years earlier for a child before any marriage — typically does not qualify.
Can a family trust or will trust be varied on divorce as a nuptial settlement?
Yes — if the trust was made in a nuptial context, it can potentially be varied under MCA 1973 s24(1)(c). The courts have held in cases such as Mubarak v Mubarak [2001] and Brooks v Brooks [1996] (HL) that even pension arrangements can constitute nuptial settlements if made in relation to the marital relationship. A will trust created by a deceased parent-in-law for the benefit of 'my son and his wife and their children' could be treated as a nuptial settlement if it was made in the context of the marriage. The key question is always whether the settlement was made 'with reference to the marriage'. A family discretionary trust created by a grandparent with wide beneficiary classes is less likely to qualify. The distinction matters: if a trust is a nuptial settlement, the court can vary its terms on divorce — a significant power that estate planning must anticipate.
What can the court do when varying a nuptial settlement?
Under MCA 1973 s24(1)(c) the court has wide powers when varying a nuptial settlement: it can reduce, extinguish, or redirect the interest of either party; appoint new trustees; remove the former spouse as trustee or beneficiary; direct how the trust assets are to be divided; redirect income or capital to the children of the marriage; and in appropriate cases collapse the trust entirely and direct distribution of the proceeds. The court can also exercise the power after the death of one of the parties under s24(5). The court cannot vary the terms of the settlement as against third-party beneficiaries (such as the children) if doing so would be prejudicial to their interests — the court's role under s24(1)(c) is to achieve a fair outcome on divorce, not to punish innocent beneficiaries.
How is variation of a nuptial settlement different from a deed of variation?
A deed of variation (sometimes called a deed of family arrangement) is a post-death instrument executed voluntarily by beneficiaries to redirect inherited assets — with potential IHT and CGT benefits under IHTA 1984 s142 and TCGA 1992 s62. It requires the consent of all adult beneficiaries with full capacity and must be made within 2 years of the death. By contrast, the variation of a nuptial settlement under MCA 1973 s24(1)(c) is a court order made on divorce or nullity, without any requirement for consent from the other party or the trustees. The court imposes the variation as part of its financial remedies jurisdiction. The two instruments serve very different purposes: deeds of variation are inheritance tax and family planning tools; s24(1)(c) orders are a divorce remedy applied to settlements that were made in the context of the marriage.
How should estate planning documents be drafted to reduce nuptial settlement risk?
To minimise the risk that a trust will be characterised as a nuptial settlement and become vulnerable to variation on a child's divorce, estate planning documents should: (1) avoid describing beneficiaries as 'X and their spouse' or 'X and their wife/husband' — instead refer to the class as 'X and such of their descendants'; (2) give the trustees express power to exclude a beneficiary who is in divorce proceedings or whose interest is subject to a court claim; (3) use a genuine wide discretionary trust rather than a fixed interest trust, since a wide discretion makes it harder to show that a spouse has a settled entitlement; (4) avoid language in letters of wishes that describes the settlement as providing for the couple as a unit. The closer the settlement tracks to being for both spouses jointly as a couple, the more vulnerable it is to s24(1)(c) variation on divorce.
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