Family Law Trusts

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This is an article on family law trusts and the Courts treatment of them.

The law regarding trusts in family law matters continues to be developed by the Family Law Courts, particularly following the seminal decision of Kennon v Spry [2008] HCA 56 which represented the first consideration by the High Court of the treatment of trust property pursuant to Section 79 of the Family Law Act 1975 in over 20 years.

Harris & Harris [2011] FamCAFC 245

A most recent case which further addressed the treatment of trust property is Harris & Harris [2011] FamCAFC 245.

In this case, the Wife claimed that a family trust which a business had operated through for several decades was the Husband’s “alter-ego” and the assets of the trust should be regarded as “matrimonial assets” for the purposes of the Family Court proceedings.

The Family Court initially agreed with the Wife’s position.

The Husband subsequently appealed that decision to the Full Court of the Family Court.

It was undisputed that the Husband had managed the business for a long period of time (initially with his Father, and then in his own right).

It was also undisputed that the Husband had caused the trust to make various distributions over time, however as a consequence of:

  • The Husband simply being a beneficiary of the trust;
  • The Husband not being the appointor of the trust;
  • The Husband not holding any position in the current trustee company; and
  • The Wife being unable to bring any evidence before the Court that there was indirect control and that the Husband’s mother (who was the director of the trustee company) was simply the Husband’s “puppet.”

The Full Court found that the assets of the trust could not be regarded as “matrimonial assets.”

In forming this view, the Full Court stated, “On the evidence to which we have referred, the best that we could do would be to determine that the Trust is a very significant financial resource for the husband.”

Practical considerations

This decision is the latest in a line of case authorities dealing with the treatment of trusts in family law.

In particular, this decision has:

  • defined the concept of “indirect control” as a “puppet” situation; and
  • established that in order to prove that there is indirect control of a trust, supporting evidence must be brought before a Court to properly support a “puppet” scenario, rather than merely relying on the Court to consider the history of trust distributions alone.

Have a query regarding a Family Law Trusts? Contact us today.

If you have separated and you have made or intend to make any changes to a trust and/or a trustee company (which you have or your ex-partner has an interest in, even if only as a beneficiary), please contact of our Business Development Officers on (07) 3252 0011 to arrange an initial appointment with one of our Brisbane Family Lawyers to discuss further.