Trusts stand the test of time – insights from Caldwell & Caldwell [2025] FedCFamC1F 506

When undertaking your estate planning, it’s natural to focus on ensuring your loved ones are looked after. But what happens if one of your beneficiaries experiences a relationship breakdown or becomes involved in family law proceedings? Without proper planning, assets intended to support future generations may be exposed to division by the Family Court.

The recent decision of Caldwell & Caldwell [2025] FedCFamC1F 506 in the Federal Circuit and Family Court of Australia (Division 1) provides timely guidance on how family trusts—particularly those with strong succession planning—can withstand scrutiny in family law disputes.

Case overview

The proceedings involved a couple who separated in early 2022 after a 30-year marriage and divorced in 2023. The matrimonial asset pool, excluding trust and company assets, was substantial and estimated to be valued between $16 million and $22 million.

Central to the dispute were three (3) discretionary family trusts and several companies that held assets, including an intergenerational family business established by the husband’s great-grandfather in the early 1900s. These assets were built over four (4) generations and were not created, or increased, by the efforts of the couple during their marriage.

The wife sought a declaration under section 79 of the Family Law Act 1975 (Cth), arguing that the trusts formed part of the matrimonial property pool. Her claim was based on the fact that control of the trusts had passed to the husband following his father’s death.

The husband was one of three (3) Appointors of the trusts, alongside his siblings. The Appointor role gave the siblings ultimate control of the trust, by granting them the power to appoint or remove Trustees. The Trustees, in turn, make the day-to-day decisions of the Trust, including whether to distribute income or capital of the trust, and who should receive those distributions.

The husband had never received a distribution from the trusts, although he was included in the pool of discretionary beneficiaries who could benefit from the Trust (at the Trustee’s discretion). The wife had never been a beneficiary and was explicitly excluded as a beneficiary 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;
• There were significant assets of the marriage which were sufficient for a just and equitable property settlement to be reached between the husband and wife;
• 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.

The outcome may have been different had, say, the husband been the sole Appointor of the trust as this would indicate that he has sole discretion over the assets in the trusts and how income of the trust may be distributed to beneficiaries, or if the wife was not 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 a powerful tool to preserve inheritances and reduce exposure to future relationship breakdowns when structured appropriately.

At Coulter Legal, we understand the complexities of estate planning and family law. Our experienced team can help you:

• Establish Testamentary Trust wills tailored to your family’s needs;
• Establish Family (Discretionary) Trusts during your lifetime;
• Structure your Will to protect assets from future claims, including arranging for the proper succession of existing entities such as trusts and companies; and
• Ensure your succession planning aligns with your long-term goals.

Protect your legacy. Plan with confidence.

If you wish to learn more about some of the topics discussed in this article, we invite you to listen to the relevant episodes on our Where There’s a Will, There’s a Way Podcast:

• Understanding Testamentary Trusts: Benefits, Roles, and Impacts in Estate Planning
• Protecting Your Inheritance – Family Law, Prenups & Estate Planning
• Share Farming Agreements and Succession in Agribusiness

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, please contact our Wills, Estates & Succession Planning team on (03) 5273 5273.