Buying a UK property: What asset protection options are there?

• 20 July 2021
• News
• Family and divorce
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• Residential property
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• US/UK

Last updated: September 2026

Use of trusts

While the use of trusts to hold UK residential property can potentially offer some degree of asset protection when compared to outright personal ownership, this protection may not be as robust as clients would like. In the event of a divorce, for instance, trust assets can be considered a financial resource available to the spouse who is a beneficiary (although this will depend on the terms of trust, distribution patterns, etc.) and the trust may even be treated as a “nuptial settlement” if it is settled by one or both of the couple, or by a third party for their benefit. If a court finds the trust is a nuptial settlement (which is comparatively rare but not unheard of) it will have extensive powers to change the terms of the trust, remove/replace trustees, order distributions, etc. This is in stark contrast to the position in the US, where trusts are generally robust and immune from variation.

The use of trusts might also be unattractive from a tax perspective. For instance, the value of the property would suffer an IHT charge of up to 6% every ten years while it was held in trust. The property would also continue to form part of the estate of the settlor (so be subject to IHT on his or her death) unless he or she was irrevocably excluded from benefit. Excluding the settlor from benefit is unlikely to be practical if he or she wishes to occupy the property. Furthermore, holding the property in trust would give rise to reporting obligations for the trustees, who would need to report the existence of the trust and details of its beneficiaries to HMRC through the Trust Registration Service.

As a result, there will only be very limited scenarios in which trust ownership will be appealing. Generally speaking, direct personal ownership will be the preferred route for the family home.

Protecting assets from separation or divorce – Dickon Ceadal, Family Partner:

Nuptial agreements

A pre-nuptial or post-nuptial agreement offers the best degree of protection for UK property on divorce. Parties are able to define marital property (which is to be shared) and separate property (to be ringfenced) on divorce and can also seek to prescribe levels of maintenance payable on separation. Whilst pre-nups are not automatically enforceable in England and Wales, provided the agreement meets the parties’ respective needs, and those of any children, its terms should generally be upheld.

There are many reasons why people have a nuptial agreement, including;

(i) if there is an actual or expected disparity between the wealth of the spouses;
(ii) there are assets which have been in one of the couple’s families for generations that they would like to protect on divorce, in order that future generations can benefit and
(iii) if it is not a first marriage and a party wants to preserve assets for children of a previous marriage.

The aim of nuptial agreements is to provide certainty and security if the marriage did breakdown, and more power to a couple to make arrangements for the future, rather than leaving everything to be determined by the court. Above all else, a pre-nuptial or post-nuptial agreement can save acrimony and potentially significant costs if there were a divorce in the future.

Pre-nups and post-nups will be familiar territory to many US-connected clients, but there are some additional considerations and differences that they will need to be aware of on moving from the US to the UK. English nuptial agreements are not automatically enforceable like pre-nups in the US, but are instead afforded differing weight depending on a number of factors. Case law states that the starting point is that nuptial agreements should be upheld so long as they must meet certain conditions including;

(i) the agreement been entered into freely;
(ii) each party has taken independent legal advice;
(iii) there has been full financial disclosure by both parties; and
(iv) agreement is fair. This element of fairness is the second main differentiator between UK and US pre-nups; if a US pre-nup is in place, it must satisfy the principles of fairness to be upheld in England.

It would be wise for any clients that are moving from the US to the UK to have their arrangements reviewed by a specialist English family lawyer and revised or supplemented, if necessary, to provide more robust protection against claims on divorce. Alternatively, if a nuptial agreement is not in place, a move to the UK or an investment in UK property may provide the impetus to negotiate a post-nup.

Cohabitation

There can also be a risk of claims against property on the separation of unmarried cohabitees. While cohabiting couples currently have no automatic legal status on separation, (there is no such thing as common law marriage in England), there are a number of means through which one party can make a claim against the other with respect to property. Moreover, the Labour Government has now completed its consultation on reforming the rights of unmarried couples, with proposals for enhanced protections for cohabitants under consideration. It is therefore important to note that this is a developing area of law and the legal position may change in the coming years.

However, as things stand in England and Wales, cohabitation is a patchwork quilt of potential claims that can call on various different areas of law, including property, family, trust and children law, to make a claim.

For example;

a) Claims for the benefit of children – The court could make a settlement or transfer of property order, to provide a home for the child for their minority (NB: Any capital awarded to purchase a property is likely to be held in trust until the child’s majority or the end of full-time education, when it will revert to the payer).
b) Trusts of land – One party may be able to rely on actions during the course of a relationship (e.g. conversations, oral agreements, regular payments towards outgoings in relation to the property etc.) to establish a beneficial interest pursuant to an implied, resulting or constructive trust. The latter is most relevant in the domestic context. Alternatively, a party can rely on proprietary estoppel to claim a beneficial interest.

They must show:

(i) an assurance on the part of the other party (e.g. leading them to believe they will have some right in relation to the property)
(ii) that they relied on the assurance to their detriment; and
(iii) that it would be unconscionable for the other party to deny them the right they expected to have.

Cohabitation agreements can protect against these risks. They allow parties to regulate the terms of their cohabitation, providing clarity both during the course of the relationship and in the event that it should break down.

The agreement would incorporate or be accompanied by a declaration of trust in relation to any real property, confirming the parties’ respective beneficial interests. The agreement can also deal with a wider range of issues, including how household expenses are to be split; what happens if one party wishes to sell the property and the other does not; financial support during and after cohabitation; and living arrangements and financial provision for children.

Security and clarity of such a kind is extremely beneficial to a couple if the relationship breaks down in the future.

Conclusion – How we can help

The UK and London in particular remains a leading destination of choice for wealthy international families.

While there will often be additional challenges for US-connected clients, these can be navigated with the right team on board. Our private client team have UK-US cross border specialists experienced at guiding US connected clients through their planning. Along with our strong network of expert contacts, we are on hand to provide comprehensive support.