Caldwell and Caldwell [2025] & [2026]

Written By: Simran Suvarna

Whether family trusts (especially those tied to multiple generations) count as “property of the marriage” is often a question that arises during property settlement following separation. The recent case of Caldwell & Caldwell [2025] FedCFamC1F 506 addressed this issue.

Background:

The husband and wife separated in 2022, following a 30-year marriage. The wife sought property settlement orders under s 79 of the Family Law Act 1975 (Cth).

There were three discretionary family trusts (the B Trust, C Trust and D Trust) in question, all of which were built on wealth accumulated over four generations of the husband’s family, through the family business. The trusts were controlled by the husband’s late father, Mr K, and structured so that only direct descendants of Mr K would be beneficiaries – therefore, the wife was excluded.

After Mr K’s death, the husband and his sons became appointors/principals of the trusts. The wife argued these trusts (and their assets) should be treated as “property of the parties” under s 79. The husband agreed that the trusts were a financial resource, but not property.

The Court had to decide whether the husband’s control over the trusts meant they should be treated as marital property.

To do so, Justice Carew had to consider:

1. Whether the husband’s role as appointor give him effective ownership of the trusts.

1. Whether to declare the trusts as “property” under s 79, despite their original purpose.
2. Whether forcing the husband to exercise powers to benefit the wife would result in a breach of fiduciary duties or the trusts’ purpose.

 

The Decision

Justice Carew dismissed the wife’s application, determining that the trusts and their assets were not considered “property” under s 79.

She provided the following reasons for this decision:

• The trusts were not shams or the husband’s personal alter ego.
• Their wealth came from Mr K and earlier generations, not from the husband and wife’s labours during their relationship.
• The trust deeds were designed to preserve wealth for direct descendants, and the wife was an excluded beneficiary.
• The husband’s power to appoint/remove trustees was constrained by fiduciary obligations and the “proper purpose” rule – he could not use the trusts to channel assets to the wife that would benefit her directly or indirectly.
• The couple already had substantial asset pool in question, so a just and equitable division could occur without disturbing the trusts.

The Court held that the trusts were a financial resource (something to be considered when assessing future needs), but not “property” to be divided.

Why it matters?

The decision insinuated the following when dealing with family trusts in property settlements:

• Inclusion of trust assets as “property” under s 79 depends on real control, history of use and the trust’s purpose, not just power being allocated to one of the parties.
• Courts are reluctant to interfere with trusts that are clearly established to preserve wealth for future generations, particularly where a reasonable asset pool exists to otherwise achieve fairness.
• Having the power to appoint or remove trustees from a trust does not supersede fiduciary duties or trust purposes that prevent its use to benefit a spouse.

The Takeaway

Caldwell & Caldwell illustrated the way in which Court’s may approach intergenerational trusts. While they may be regarded as financial resources, they may not automatically be treated as property unless controlled for a spouse’s personal benefit.

Caldwell & Caldwell: The Appeal

The Full Court has however, more recently delivered an important appeal decision in Caldwell & Caldwell [2026] FedCFamC1A 81, overturning the initial judgement that excluded the three discretionary family trusts from the matrimonial property pool.

Background:

The wife appealed the initial decision on the grounds that the trial judge had incorrectly considered whether the husband had historically used the trusts for his own benefit, instead of considering whether he presently had the ability to control them. She maintained that the trusts should be considered “property” for division under section 79 of the Family Law Act (1975).

The Decision:

The majority (being Justices Christie and Brasch) allowed the appeal on the basis that the primary judge had incorrectly conflated two separate stages of the necessary analysis under family law: the task of identifying whether the trusts were property with the later discretionary task of determining whether it was just and equitable for the trust assets to be adjusted.

The Court found that the husband had capacity to exercise effective control over the trusts in the future as he held sufficient powers including voting rights, control over the identity and appointment of trustee companies and the ability to remove the parties’ children as co-appointers or principals.

The husband raised the counterargument that he had never taken any such steps to assume control of the trusts, however the Court maintained that the question was not whether he had previously taken such steps, but rather, whether he presently had the capacity to do so. The majority held that in this case, there was nothing impeding on him exercising control over the trusts if he wished.

 

The Takeaway:

This decision makes clear that capacity for control is the critical consideration when determining whether discretionary trust interests constitute property, as opposed to historical use.

Perhaps most importantly, the ultimate determination of whether the wife will receive any adjustment of property given the inclusion of the trusts as matrimonial property remains to be seen as the appeal court remitted the matter back to a trial judge for re-determination.  So, even though the trust forms part of the pool, whether or not any adjustments should be made in relation to the trust assets remains a separate, discretionary question to be determined by the Court during the trial and will be dependent on broader considerations such as individual contributions prior to and during the relationship, and future needs.

The appeal decision only serves to reinforce the principle that effective control over a discretionary trust by a party is enough for the trust to be treated as property, even if that control has never been exercised.