Intergenerational Family Trusts and Property Division

This article explores the distinction between a financial resource and matrimonial property, and how that distinction was applied to three intergenerational family trusts in Caldwell & Caldwell. Here, the Family Court considered whether the trusts formed part of the matrimonial property pool following the parties’ separation after a 30-year marriage.

First Instance Decision – Caldwell & Caldwell [2025] FedCFamC1F 506

Background

The three trusts had been established across four generations of the husband’s family and were intended to benefit only descendants of the husband’s late father. This meant the wife was excluded as a beneficiary.

The wife argued the trusts should be included as matrimonial property under section 79 of the Family Law Act 1975; the husband argued they were merely a financial resource.

Findings

Justice Carew found the trusts were not property of the parties’ to be included in the property pool because the wealth was built from previous generations and not from efforts of the parties, the husband had limited powers to control the trusts, neither the husband nor the wife had ever received distributions from the trusts, and the existing matrimonial property pool was sufficient to achieve a just and equitable outcome.

Accordingly, the trusts were treated as a financial resource only – and to be considered in terms of the husband’s future needs, rather than property to be divided between the parties.

Appeal Decision – Caldwell & Caldwell [2026] FedCFamC1A 81

The wife successfully appealed the decision of Justice Carew. She argued that Justice Carew focused too heavily on whether the husband had historically used the trusts for his own benefit, rather than whether he has current ability to control them.

Ultimately, whether the primary Judged erred in their decision came down to the level of control capable of being exercised by the husband over the trusts – the critical issue was his capacity for control, not whether he had previously exercised it. The majority found that the husband had sufficient powers to exercise effective control over the trusts if he chose to do so.

The trusts were therefore capable of being treated as property for family law purposes and the matter was remitted for rehearing.

Capacity to control the trust – what factors did the Court consider?

The majority placed significant emphasis on the husband’s practical and legal control of the trusts, namely (and common to all trusts):

1. The husband had capacity to appoint himself as trustee [24].
2. As first named holder of the A Class Shares – which carried the voting rights – the husband had capacity to control the composition of the boards of the trustee companies [25].
3. The husband had previously participated in restructuring the trusts to ensure:
   1. His sister was removed as co-appointor;
   2. His sons were appointed as co-appointors; and
   3. He retained the capacity to remove his sons [101].
4. The husband had capacity to control the identity of the trustees [101].
5. The trust deeds did not prevent the husband from bestowing a benefit upon himself [101].

Critically, there was no impediment to the husband exercising control – it was not necessary for the husband to have taken action to demonstrate that he had sufficient control [26].

Practical implication for family law practitioners

The appeal reinforces that in family law property proceedings, the capacity to exercise effective control over a discretionary trust may be enough for the trust to be considered property. When considering whether trusts from part of the matrimonial property pool or make up a financial resource, family law practitioners should consider whether one party has the ability to control the trust, as well as the capacity to benefit from the trust.

Whether the trust assets should ultimately affect the division of property remains a separate discretionary question for the Court.