the importance of family trusts in succession planning and asset protection in the context of family law disputes

Recent decision of the Family Court of Australia in Caldwell & Caldwell [2025] FedCFamC1F 506 highlights the importance of family trusts in succession planning and asset protection in the context of family law disputes.

Case overview

The case involved the break down of a 30 year marriage and importantly –

-    there were other assets outside the trust assets estimated to be valued between $16 million and $22 million;

-    husband was one of three Appointors of the trusts, alongside his siblings;

-    historically the husband had not yet received any distribution from the trusts;

-    husband was one of the beneficiaries in the pool pursuant to the Family trust;

-    while control and the power to benefit are relevant considerations, they are not determinative. The Court must also consider the origin and purpose of the trust, the conduct of the parties, and whether the trust assets would also be regarded as matrimonial property; and

-    the wife was expressly excluded as a beneficiary of the trusts during the marriage.

Court’s decision

The Court held that the assets within the trusts and companies were not property of the parties to the marriage. It found that:

·   The trusts were established to benefit lineal descendants of the husband’s family;

·   Asset pool over $10m is significant and the Court can make a just and equitable division for the wife without reference to the trust assets;

·   Court consider property to be real estate, share portfolios, superannuation and bank accounts that are to be divided in the property settlement;

·   Interest in a family trust would be considered a financial resource, like an inheritance, and these are not divided during settlement but are considered when taking into account a party’s future need;

·   The wife was excluded as a beneficiary, and there was no evidence of distributions or control that would justify treating the trust assets as matrimonial property; and

·   The succession planning undertaken by the husband’s father, particularly through his Will and the structured transfer of control, was critical in protecting the trust assets.

This case may be distinguished on the facts that the husband was not the sole Appointor with capacity individually to remove the trustee and also that the wife was expressly excluded as a beneficiary of the trusts.

Conclusion

This case reinforces the importance of strategic estate and succession planning, especially for families with trusts, farms, businesses, or generational wealth. It demonstrates that:

·   Properly structured trusts can protect assets from family law claims;

·   The role of the Appointor and the exclusion of non-lineal beneficiaries (such as spouses) are key to maintaining asset protection; and

·   Family Trusts and Testamentary Trusts created through Wills can be critical to preserve inheritances and reduce exposure to future relationship breakdowns when structured appropriately.

Philipoff Legal are available to assist with all aspects of estate planning and family law. Our experienced team can help you:

·   Review your trust deeds and structures;

·   Prepare Wills and provide Estate advice;

·   Establish Testamentary Trust wills tailored to your needs;

·   Establish Family (Discretionary) Trusts;

·   Structure your Will to protect assets from future claims; and

·   Ensure your succession planning aligns with your long-term goals.

Should you otherwise wish to discuss any of the matters raised in this article, or to make an initial Estate Planning appointment with one of our lawyers, info@philipofflegal.com.au