Caldwell & Caldwell: Can Family Trusts Be Treated as “Property” in Divorce?

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 addresses this issue and provides an insight into how the Court makes such decisions.

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.

He 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 confirmed that the trusts are a financial resource (something to be considered when assessing future needs), but not “property” to be divided.

Why it matters?

This case is significant as it reaffirms 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 illustrates the Court’s approach to intergenerational trusts. While they may be regarded as financial resources, they won’t automatically be treated as property unless controlled for a spouse’s personal benefit. This case reiterates the importance of well-drafted deeds in protecting assets across generations and the importance of focusing on assets that are truly attainable in property settlements following separation.