- within Family and Matrimonial topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- in United States
- with readers working within the Accounting & Consultancy, Advertising & Public Relations and Insurance industries
Background
The recent Federal Circuit and Family Court of Australia decision in Caldwell v Caldwell1 provides a timely reminder of how trusts are treated during family law property settlement proceedings, particularly discretionary family trusts used for succession and wealth protection.
In this case, the Court was asked to decide whether the assets of several trusts connected to the husband's family should be included in the marital asset pool for division.
Key Facts
The parties were married for over 30 years and separated in 2023. The husband's family had established multiple discretionary trusts to hold business and investment assets, with the stated purpose of intergenerational wealth planning. Further, the husband had some involvement in related entities (family business and trustee companies), but did not have sole control of the trusts.
Importantly, the wife was not a beneficiary of the trusts and had never received any distributions from the trusts. However, the wife tried to argue that the trusts should be treated as part of the marital property due to the husband's role and influence.
Court's Decision
The Court held that the trust assets should not be included in the matrimonial property pool.
Key reasons:
- The husband lacked sufficient control to treat the trusts as
his personal property.
- The trusts were set up in the early 1900's to facilitate management of Mr Caldwell's family business for the purpose of benefitting the lineal descendants of the trust's founder. Therefore, it was genuinely structured for succession purposes, not as a vehicle to hide or shield assets from the marriage.
- The wife had no beneficial interest and had never received any benefit from the trusts.
- There was enough other property available for a fair division without accessing the trust assets.
Why This Matters
This case confirms that well-established, independently managed trust structures can be shielded in family law proceedings if:
- The trust is not used to support the couple's lifestyle or
accumulate personal wealth.
- The spouse in question does not have sole control as trustee or appointor.
- Trust distributions are consistent with the stated purpose (e.g. lineal descendants).
- Proper documentation and administration are in place.
Key Takeaway
Trusts can still be effective for asset protection in the context of divorce, but only if correctly set up and administered. Blurring personal and trust assets, or having too much informal control, may therefore expose trust assets to division. Overall, clear documentation, independent trustees, and disciplined trust management are essential.
If you would like any more information, we recommend you meet with our experienced family lawyers and estate planning lawyers to review your trust arrangements if you are planning for succession, especially in family business or high-net-worth contexts.
Footnote
1 [2025] FedCFamC1F 506
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
