A trust legally owns assets on behalf of the beneficiaries named in the trust deed. Sometimes these assets owned by the trust (usually a discretionary trust) are found to be property that is able to be divided after separation.
When deciding whether the assets of a trust should be considered property of the parties and therefore divisible after separation a Court will look at who has actual control over the trust.
Recent case law has made it clear that the Family Law Courts can now deal with assets owned by a trust robustly. Using a trust to accumulate what is essentially family property will not put that property beyond the jurisdiction of the Courts.
Where the Court finds that the assets of a trust are actually property of a party to a relationship they have power to do the following:
- To bring the asset notionally back into the property pool of the parties for division
- To set aside any transaction that would have the effect of diminishing a claim under the Family Law Act
- By finding that the trust is a sham
- To make binding Orders on any third party property owner
The 2008 case of Kennon v Spry highlights where control of a trust has meant the assets of the trust fall into the property pool for division.
1968 (before marriage)- Husband settles discretionary trust, he was the trustee and settlor, there was a standard list of beneficiaries including husband, any spouse, children and so on.
1978– Marries Wife, has four daughters, Husband varies trust and excludes himself as beneficiary and appoints Wife as trustee on his death or resignation.
1998– Husband varies trust, excluding Wife as beneficiary.
2002– Husband sets up discretionary trust for each daughter, initially he was sole trustee, later a joint trustee.
Wife sought to have all trust property including that distributed to daughters included in the pool for division.
Trial Judge– Set aside 1998 and 2002 variations and ordered all assets of the trust to be included in the pool for division.
High Court– On appeal the High Court said that the Husband’s ownership as sole trustee and the Wife being a beneficiary meant assets should be treated as property in the pool.
Your circumstances at separation are unique so it is important that you obtain specialist family law advice on a property settlement and division after separation.
Farrell Family Lawyers are able to provide you with this advice, please do not hesitate to contact us.