Divorce in the air, marriages for the rich built on ‘Trust’

Mumbai: With prenuptial agreements still not legally enforceable in India, the rich are finding new ways to shield themselves from the financial blow of a marital breakdown.

The ‘private family discretionary trust’ is one such arrangement being repurposed to meet this need.

A Delhi-based garment exporter, whose son’s marriage soured very soon, said, “Thanks to the trust we’d set up before the wedding, his business interest and family home remained untouched.”


Similarly, a leading jeweller in Mumbai placed all real estate assets in a discretionary trust, naming his son as beneficiary. When the son filed for divorce, the wife could lay no claim on the properties she once thought she’d co-own. “By definition, a trust protects the interest of the beneficiaries through the trustee ” said Rajat Dutta, founder of Inheritance Needs Services. “In case a borrower defaults in financial obligations to lenders, then the assets in the trust cannot be attached by the lender, though the borrower is one of the trustees and also one of the beneficiaries,” said Dutta.

The trend, once limited to the ultra-high net worth individuals in India, is now spreading to the upper-middle-class, as people look to protect their earnings and save the family from litigation, especially in case of a divorce.

The trust also protects women. According to a lawyer, a woman who often had to deal with her husband's irrational demand for financial support, was able to protect her financial assets as they were in the trust which her father had created for his daughter and her children.

According to legal experts, this arrangement is also being adopted by traditional, business-oriented families which want to protect their enterprises, and parents of non-resident Indians who are in mixed marriages.

SHIELDING SONS, SIDE-STEPPING BIAS
Ashvini Chopra, head of family office solutions at Avendus Wealth Management, said many families are setting up trusts to shield the males from financial exposure after marriage, more so if it's not within the same caste and religion.

Trusts, structured prudently, allow families to ensure that the male child technically doesn’t own any asset and is just a beneficiary, thereby reducing the scope of a claim in case of a divorce.

“Indian parents being possessive of family wealth wish to protect inherited wealth and de -risk future perceived risks of breakups” said Dutta of Inheritance Needs Services.

Experts said that trust deeds are now being drafted keeping potential divorce in mind—a shift from their traditional inheritance-focused intent. In some recent highprofile divorces, judgments have varied widely, largely because there’s no clear legislative framework—like a prenup—to guide settlements. Citing a case, a Mumbai-based family lawyer said, "A family business was nearly halved after a divorce settlement. Had the assets been placed in a properly drafted discretionary trust, they would have been out of legal reach.”

A Mumbai-based estate planner spoke of a wealthy retired bureaucrat from Delhi who, on learning that his son wished to marry a divorcee with a girl child, put his entire wealth in a trust.

There’s also a future-facing angle to this trust trend.