One of the most common misconceptions we encounter is that assets held inside a family trust are automatically protected if a relationship breaks down. Unfortunately, the law is not that simple. The case of Caldwell & Caldwell has further muddied the waters on this topic.
As Brisbane family lawyers, we are increasingly seeing property settlement matters involving complex trust structures, family businesses and intergenerational wealth. Many clients believe that because they are “only a beneficiary” of a trust, or even if they are the trustee, they believe that because the trust was established by their parents or grandparents for the purpose of facilitating the management of intergenerational wealth, those assets cannot be considered as part of the property pool, by the Family Court.
Recent decisions of the Federal Circuit and Family Court of Australia demonstrate that this assumption is wrong.
The Courts are required to look beyond the legal ownership of trust assets and ask a much more practical question:
Who really controls the trust?
The answer to that question may determine whether millions of dollars held within a discretionary trust are included in a property pool for the purposes of a property settlement.
Importantly however, in a case where a Husband has control of intergenerational trust assets, the question as to whether the husband may be ordered to pay funds to a wife from trust assets in due course (question 2) is a question distinct from and not to be conflated with the question of whether the trusts can be considered the husband’s property (question 1).
Family Trusts and Property Settlements
Family trusts have long been used by Australian families to operate businesses, protect assets and pass wealth between generations.
They are extremely common in Queensland, particularly where families own businesses, farms, investment properties or significant investment portfolios.
However, just because assets are owned by a discretionary trust does not necessarily mean they are protected from family law proceedings.
As Brisbane family lawyers, we regularly advise clients who are surprised to discover that trust assets can sometimes become part of the property pool available for division between separating spouses.
Whether that occurs depends on the circumstances of each case, the terms of the trust deed and, increasingly, the level of control one party exercises over the trust.
The Starting Point: A Beneficiary Does Not Automatically Own Trust Assets
The starting point is relatively straightforward.
A discretionary trust owns its own assets.
The beneficiaries do not.
Instead, beneficiaries merely have the right to be considered, which in effect is a mere possibility that the trustee may exercise its discretion in their favour by distributing income or capital to them.
This principle was confirmed in Harris & Dewell and Anor [2018] FamCAFC 94, where the Full Court confirmed that the property of a discretionary trust belongs to the trust itself, not to its beneficiaries.
Likewise, in Rigby & Kingston (No 4) [2021] FamCA 5012, the Court found that the wife’s interests in a discretionary trust did not amount to property because she had no absolute right to trust income or assets and lacked sufficient control over the trust.
The Court observed that any rights she possessed were merely legal rights that had little practical value without control over the trust itself.
Many clients take comfort from these decisions.
However, they only tell part of the story.
Control Can Be More Important Than Ownership
An important factor is to look beyond technical ownership and examine who truly controls a trust.
The Family Court has repeatedly recognised that legal structures should not be used to disguise the reality of who can access and control wealth.
If one party has sufficient control over the trustee, appointor powers or voting rights associated with the trust, the Court may conclude that the trust assets are effectively that person’s property for family law purposes, in which case the trust assets will be included in the property pool.
For family lawyers north side Brisbane, this has more recently become one of the most significant issues arising in property settlements involving family businesses and trust structures.
The High Court’s Decision in Kennon & Spry
The leading authority remains the High Court decision of Kennon & Spry.
Although the trust contained numerous beneficiaries and appeared to be a traditional discretionary family trust, the High Court focused on the extensive powers retained by the husband.
The husband possessed the ability to appoint and remove trustees and effectively control how trust assets were dealt with.
Because of those powers, the High Court concluded that the trust assets could be treated as property available for alteration under the Family Law Act.
The case established an important principle that control can be just as important as legal ownership.
Companies Can Also Be Looked Through
Many trusts operate through corporate trustees.
Sometimes parties assume that because a company sits between themselves and the trust, the assets are further protected.
For family law purposes, it is not that simple.
In Atkins & Hunt and Ors (No 3) [2019] FamCA 977, later upheld on appeal, the Court considered circumstances where a company had become nothing more than the “puppet” or “alter ego” of an individual.
Where a company exists merely as an instrument through which one party exercises complete control, the Court may effectively treat the company and that individual as one and the same.
The same reasoning can apply to discretionary trust structures where one party effectively controls both the trustee company and the appointor powers contained within the trust deed.
As Brisbane family lawyers, we regularly work alongside relevant experts to examine trust deeds, company constitutions, shareholder arrangements and appointor powers to determine who truly controls the trust structure.
The Decision That Has Everyone Talking – Caldwell & Caldwell
Perhaps the most significant trust decision delivered this year is the appeal case of Caldwell & Caldwell [2026] FedCFamC1A 81.
The case involved three discretionary trusts associated with a family business that had existed for over one hundred years.
The trusts had been built across four generations.
The husband had worked within the business his entire career and was well remunerated, but he had never personally received a distribution from the trusts.
His father had established much of the structure and significant family wealth existed within the trusts.
The couple separated in 2022. Later that year the Husband’s father died and the Husband inherited shares in the trustee companies. He became joint appointer of all 3 family trusts, alongside the couple’s two adult sons.
The wife argued that the discretionary trusts and trust assets be treated as the husband’s property for the purposes of their property settlement. The wife’s argument was simple. The Husband controlled these discretionary trusts and could benefit from them, and so the assets should be included in the pool.
The Husband disagreed. He asserted that his father set up these family trusts. Four generations built the assets. He never received a distribution during the marriage or after, and the trust assets were not his to distribute.
At first instance, in 2025, the Carew J agreed with the husband and concluded that the trust assets connected with the Husband’s family business were not his property. The Court’s reasoning was that the trusts had existed for generations, the wife was an excluded beneficiary (since 2019) and so she could not receive any benefit from the trusts, the husband had never received distributions himself, and the trusts were intended to preserve family wealth.
The primary judge also noted an ancillary agreement made by the Husband with the parties’ sons during litigation whereby he promised not to remove them as co-appointers once proceedings ended. To the primary judge, this showed the Husband did not intend to exercise unilateral control. The Judge treated the trusts as a financial resource rather than property.
On appeal, the majority reached a different conclusion.
Why the Appeal Court in Caldwell & Caldwell Reached a Different Result
The Full Court majority (Christie and Brasch JJ) found that the original decision was wrong because the primary judge confused/conflated two separate and questions.
The first question is whether the trust assets constitute property available under the Family Law Act.
The second question is whether those assets should ultimately be divided and, if so, in what way.
The majority held that the husband had sufficient effective control because he could:
- Remove co-appointors (including the sons);
- Control the trustee companies through voting rights;
- Ultimately cause benefits to be distributed to himself.
Therefore the trusts (or their assets) were property for s 79 purposes.
The majority emphasised that issues such as fairness, family history, contributions by previous generations and the interests of other beneficiaries (the matters that the primary judge focused on in her original decision which concluded that the trusts did not constitute property) may all be relevant to the second question.
However, they are largely irrelevant to the first question.
Instead, the Court focused almost entirely on control.
The husband held the A class shares and primary voting rights in all three trustee companies and possessed powers allowing him to remove his co-appointors (his sons) without their consent, at any time.
Although he had never exercised those powers, and although there were family understandings that they would never be exercised, the Court held that the legal powers contained in the trust deeds were what mattered.
He had effective control and the power to distribute to himself, making the family trusts property under the Family Law Act 1975.
When it came to answering the first question, whether the trust and trust assets constituted property under the Family Law Act 1975:
Intentions of the Husband or other third parties did not matter.
Private family agreements did not matter.
The deceased father’s wishes did not matter.
Extrinsic documents prepared subsequent to the creation of the trust did not matter.
The legal power by the Husband to control the trust was sufficient.
The Court ruled in favour of the Wife, that the trust assets constituted property of the Husband. The Court noted the parties were in agreement that if this finding was made, it was appropriate for the Court to re-exercise discretion in relation to division of assets. This could not be done by the Appeal Court however, for reasons explained further down in this article.
The Court was at pains to point out that nothing required the Husband to confer upon the Wife assets of the trust, although reality might dictate that the payment is likely to be achieved by trust assets.
At paragraph 91 and 92, the majority held:
-
“The wife certainly seeks orders the effect of which (if made) would see her receive an indirect benefit from the assets of the trusts. However, as we have said, a finding that the trusts are property of the husband does not necessitate an adjustment from them. Furthermore, even if a judge hearing the matter in due course determined it was just and equitable that the wife receive a payment from the husband which reality dictates would be achieved from trust assets, this would not change the character of the trusts: property of the husband available to meet his obligations in the exercise of his control, akin to those authorities which have determined that a trustee’s power was sufficiently broad to permit a distribution designed to discharge moral and social obligations to make charitable gifts.
-
Where, as here, the relevant trust deeds permit the husband to confer a benefit upon himself, it is difficult to conceive of a circumstance in which his act in conferring a benefit upon himself would offend the proper purpose rule.”
This decision has significant implications for discretionary trusts throughout Australia.
A Powerful Dissent
Importantly, the Full Court was divided.
Justice Strum delivered a detailed dissent that has attracted considerable attention throughout the family law profession.
His Honour questioned whether control alone should be sufficient.
After all, four generations had built the family business.
The husband had never drawn money from the trusts.
The trust assets had never effectively belonged to him personally.
Justice Strum focused on what the Wife was actually asking for. She was not asking the court to recognise an existing property interest, she was asking the court to compel the husband to seize control, to remove his sons and to override his father’s wishes, and create a property interest that did not exist yet.
Strum J suggested that compelling a party to exercise powers they had never intended to use in order to create a property interest may not be consistent with the purpose of the Family Law Act.
Strum J gave weight to the Father’s wishes and the codicil to the Father’s will, which made his intentions clear. According to the Father his business should stay under the control of the Husband and the two sons. Forcing the husband to override that was something the court should not sanction.
The existence of such a strong dissent demonstrates that this area of law remains unsettled and will likely continue to evolve.
What happens now following the appeal Court’s decision in Caldwell & Caldwell? The broader significance of Caldwell & Caldwell
The Wife won the appeal. The Appeal Court by majority declared that the family trusts were the husband’s property. The Court is now required to re-exercise discretion in relation to the division of assets, having regard to the Appeal Court’s finding that the trusts are the Husband’s property. For that purpose, the matter was remitted to a Trial Judge. As far as we are aware, the new trial for the purpose of the Court re-exercising discretion, has not yet taken place.
It remains to be seen as to whether the appeal court’s decision will be appealed by the Husband to the High Court.
The broader significance of Caldwell & Caldwell
The real significance of Caldwell & Caldwell is that the majority appears to have shifted the focus of the Kennon v Spry analysis heavily toward effective control.
The majority’s approach can be summarised as:
If you can take control and benefit yourself, the trust is likely property.
Strum J’s dissent is much closer to the traditional asset-protection argument. He considered that control and self-benefit are necessary but not always sufficient, and that the intergenerational purpose and history of the trusts remained highly relevant to the characterisation exercise itself.
That division within the Court is one reason many practitioners expect Caldwell to be cited extensively in future trust cases, and potentially to attract consideration by the High Court if a suitable case arises.
Why didn’t the Full Court just re-exercise the discretion?
The trial never properly reached the discretionary stage in relation to those trust assets.
Once Carew J decided the trusts were not property:
- there was no valuation exercise directed to those trusts for distribution purposes;
- there were no findings about contributions relating to those trust assets;
- there were no findings about how the interests of the sons or other beneficiaries should affect any adjustment;
- there was no just and equitable analysis undertaken on the basis that the trusts formed part of the pool.
The majority repeatedly emphasised that the primary judge had looked at matters such as:
- the origin of the wealth;
- the father’s intentions;
- intergenerational succession;
- the wife’s exclusion as beneficiary;
at the wrong stage of the analysis. Those matters may still be highly relevant later, but only after the trusts are first recognised as property.
In other words, the Full Court corrected Step 1 but the trial judge had never properly performed Step 2.
The usual principle regarding the Appellate Court re-exercising discretion comes from authorities such as House v The King.
After finding error, an appellate court can re-exercise discretion if:
- all relevant facts are found;
- credibility issues do not need further determination;
- the record is sufficient.
If additional factual findings are required, remittal is usually preferred.
That’s effectively what happened here.
The Full Court could determine the legal question:
“Are these trusts property?”
because that depended largely on the trust deeds and the husband’s powers.
However, it could not safely determine:
“What percentage of those trust assets should the wife receive?”
because the necessary factual and evaluative findings had not been made.
Hence, the re-exercise of discretion was required to be done by the Trial Judge.
The interesting practical consequence of Caldwell & Caldwell
The husband may ultimately win a very similar percentage outcome despite losing the appeal on the property issue.
The majority expressly indicated that:
- the intergenerational source of the wealth;
- the fact that four generations created it;
- the interests of other beneficiaries;
- the husband’s limited historical use of the trusts;
may all be relevant to the assessment of contributions and adjustment (question 2 – whether the trust assets should be divided in the property settlement).
So the trusts are now “in the pool”, but that does not automatically mean the wife receives a share proportionate to their value.
That is why the matter had to go back to Trial for the purpose of the re-exercise of discretion.
What Does This Mean if your family has family trusts?
The practical lesson from these cases is significant.
If you control a discretionary trust through appointor powers, trustee powers or voting rights, those assets may become relevant in your property settlement, even if:
- You have never received a distribution from the trust.
- The trust was established by your parents or grandparents.
- The trust exists for succession planning purposes.
- Other family members have contributed to building the wealth.
- You have never intended to exercise your powers.
The important questions to ask and principles are:
- Does one spouse have effective control? If a spouse controls the trustee and can direct benefits to themselves then the assets in discretionary trusts can be included in the property pool, even if someone else built them.
- Where did the assets come from? – Most judges will consider the origins of the trust assets. A trust built for marital contributions is treated differently from multi-generational family wealth. the majority and dissenting decision split on this point. The majority determined that these factors were irrelevant to whether the trust assets were the Husband’s property.
- Does intent matter if legal power exists? – the husband had no intention of seizing control of the family trusts. He had agreed post separation with his sons not to remove them as co-appointers. The majority said that none of this mattered if the legal power to control the trust exists. This is an important principle – intention is irrelevant to whether the trust assets constitute marital property.
- Will other beneficiaries interests protect the trust? The sons and other family members, the deceased father’s wishes – none of that was relevant to the issue of whether the trust assets were the husband’s property. Third party interests may factor in later, in relation to the second question – should those assets be divided in the property settlement and if so how.
For our family lawyers north side Brisbane, trust structures are becoming an increasingly common feature of complex property settlements involving family businesses and significant wealth.
Each trust deed is different and each case turns on its own facts.
Why Early Advice Is Critical
Obtaining legal advice before separation or proactively after separation, can significantly reduce future uncertainty.
As Brisbane family lawyers, we regularly come across clients with discretionary trusts, companies, business interests and complex property settlements involving significant family wealth.
Understanding who controls a trust, rather than simply who benefits from it, has become one of the most important issues in family law matters.
Contact Us
If your property settlement involves a family trust, company structure or family business, obtaining legal advice as early as possible is critical.
At Barton Family Lawyers, our experienced Brisbane family lawyers regularly work with expert business valuers to assist and advise clients on complex trust structures, to enable the structures to be valued appropriately.
If you are searching for experienced family lawyers north side Brisbane to assist with a property settlement involving trusts or business structures, our team can provide practical, strategic advice tailored to your individual circumstances.
Contact Barton Family Lawyers today to arrange an initial consultation and discuss your matter with one of our experienced family lawyers.
