Family Trusts – How are they treated in family law property settlements

Family Trusts have often been used as an effective means of protecting assets from creditors and implementing tax minimisation strategies.

Following separation, issues can arise as to how the trust is treated for the purposes of a family law property settlement.

When considering an application for property settlement the court has a wide discretion to make any order it considers just and equitable, having regard to several factors including financial and non-financial contributions.

To assess these matters the Court firstly needs to establish what the assets of the parties actually are and what property is available for distribution between them. This task can often be made more difficult where there are family trusts involved.

A family trust will be considered property for the purposes of a family law property settlement. The court has the power to look into the trust and determine what are the assets of the trust that may be available for distribution between the parties.

When examining a trust, it is important to consider:

  • the terms of any trust deed – who is the appointor or principal of the trust, who is the trustees and beneficiaries;
  • where the trustee is a company, who has control of that company?
  • what exactly are the assets of the trust and how were they acquired and financed.

It is therefore important to ensure that full and frank disclosure has been made and that the trust deed and all associated documentation is obtained in relation to any interest the parties or a party have in relation to a trust.

It is difficult to quarantine a family trust from a property division. Even where attempts have been made to move assets around or change the trust arrangements the court will have the power to consider who ultimately has or has had the control of the trust and who is to benefit from that trust.

For example where a Husband is the director of a corporate trustee and is also the appointor and beneficiary of the trust his interest is likely to be considered property. If, however, the Husband together with his father were directors of a corporate trustee and the Husband’s father was the appointor, it may be that any property of the trust is not classified as property of the Husband.

If you require assistance with a property settlement matter, please contact our experienced family lawyers cairns team today.