{"id":26455,"date":"2023-09-14T23:20:00","date_gmt":"2023-09-14T23:20:00","guid":{"rendered":"https:\/\/rmolaw.com.au\/trust-and-property-settlement\/"},"modified":"2025-02-24T05:11:45","modified_gmt":"2025-02-24T05:11:45","slug":"trust-and-property-settlement","status":"publish","type":"post","link":"https:\/\/rmolaw.com.au\/zh\/trust-and-property-settlement\/","title":{"rendered":"Trust and Property Settlement"},"content":{"rendered":"

A trust<\/strong> is not a separate entity and cannot be a party to a legal proceeding. It\u2019s a versatile structure that many people can use to their advantage for a broad range of business activities. You can use trusts with a trading function, hold shares in an operating company, or hold personal assets. In any event, trusts are beneficial because they can safeguard assets, distribute income, and reduce tax burdens.<\/p>\n

The key parties<\/strong> to the trust are the settlor, trustee, appointors and beneficiaries.<\/p>\n

The settlor<\/em><\/strong> is the person responsible for establishing the trust and provides the trustee with the assets to be held for the benefit of the beneficiaries.<\/p>\n

The trustee<\/em><\/strong> holds the legal title to the trust property and is bound to use its legal position as owner of the property for the benefit of the beneficiaries.<\/p>\n

The appointor<\/em><\/strong> has effective control of the trust and is responsible for appointing and replacing the trustee\/s.<\/p>\n

The beneficiaries<\/em><\/strong> do not have any proprietary interest in the trust property. Their interest is a chose in action, entitling them to call upon the trustee to deal appropriately with the trust’s income and\/or capital.<\/p>\n

However, what happens to a trust when property is divided in the event of a separation or divorce? Are trusts immune from a claim by an ex-spouse or former partner?<\/strong><\/p>\n

While every case is different, there is a general four-step process which will ordinarily be followed when it comes to dividing property between the parties in a property settlement. First step in the process is identifying the assets and liabilities of the parties and determining their value.<\/p>\n

Whether a trust is an asset, the question of who has control of a trust is an essential factor that the court will consider. Depending on the circumstances and who controls the trust, it will be considered either as:<\/p>\n

1. An asset; or
\n2. Financial resource<\/p>\n

If a party is found to have the ability under the terms of the trust to distribute to themselves, or person or entity of its choice, all of the trust\u2019s income, that party will usually be found to have control of the trust. If the court finds that a party to the marriage or de facto relationship has control of the trust, the court can include the trust assets<\/em><\/strong> as part of the property to be divided between parties.<\/p>\n

If a party is found to have no control under the terms of the trust but is likely to continue to have access to an income stream from a trust going forward, it is found to be a financial resource<\/em><\/strong>, and the trust assets will not be part of the property to be divided between the parties. However, its existence could be taken into account when considering a further adjustment of available property under s 75(2) or s 90SF(3) of FLA \u2013 matters to be taken into consideration in relation to spousal maintenance.<\/p>\n

When deciding whether or not a party\/s to the marriage or de facto relationship has control over the trust and whether the trust assets should be included in a property settlement, the court will consider the following factors:<\/p>\n

\u2022 Terms of the trust deed
\n\u2022 Identity of the trustee
\n\u2022 Control of the trustee, if the trustee is a company
\n\u2022 Identity of the appointor
\n\u2022 Trust income distribution history
\n\u2022 Assets of the trust and how they were acquired
\n\u2022 Beneficiaries of the trust
\n\u2022 Any relevant changes to the trustee or beneficiaries of the trust during the course of the relationship
\n\u2022 History of dealings with assets and income of the trust and by whom
\n\u2022 The degree of influence of the parties to the marriage or de facto relationship to the appointor of the trust<\/p>\n

In Coventry & Coventry and Smith<\/em> (2004) FLC 93-184; [2004] FamCA 249, the Full Court held that the husband controlled the trust despite the fact that his mother was the trustee. The husband was the principal beneficiary of the trust and the appointor of the trust since the death of his father.<\/p>\n

In Ashton and Ashton<\/em> (1986) FLC 91-777; [1986] FamCA 20, the Full Court also held that the trust was controlled by the husband and, therefore, property available to be distributed between the husband and the wife despite the fact that the trustee of the company was a company of which the husband and his cousin were trustees. The court held that the husband\u2019s power of appointment under the trust deed and all the attributes it carried with it amounted to a de facto ownership of the property of the trust.<\/p>\n

In the case of Kelly and Kelly<\/em> (No.2 (1981) FLS 91-108; [1981] FamCA 78, the Full Court found that the husband could arrange the funds of the trust as he pleased and that he could direct the affairs of the trust. Similarly, in the case of Goodwin and Goodwin Alpe<\/em> (1991) FLC 92-192, the husband exercised his power to exclude the wife and her children as beneficiaries.<\/p>\n

Third party trustee<\/strong><\/p>\n

It is not unusual for a party to try and hide their control in a trust by having a third party listed as the trustee.<\/p>\n

Before the introduction of Part VIIIAA of the Family Law Act 1975<\/em> (Cth) (\u2018FLA\u2019), the court was required to determine whether the trust:<\/p>\n

\u2022 Was a trust in which a party to the marriage had only a mere expectancy,
\n\u2022 Should be treated as the property of the parties (or either of them), or
\n\u2022 Was a financial resource of the parties.<\/p>\n

If the court found that the property of the trust was in fact property of the party, it was directly available for distribution within the property proceedings\u00b9.<\/p>\n

If the property was found to be a financial resource, the property was not available for division within the proceedings.<\/p>\n

If it was only a mere expectancy, it was disregarded within the property proceedings.<\/p>\n

These considerations are still important in contemplating whether a trustee must be joined as a third party. If this becomes evident that the third party listed as a trustee is simply a paper exercise and is not, in fact controlling the trust, arguments may arise that the trust is, in fact, an asset of the relationship.<\/p>\n

Key Takeaways<\/strong><\/p>\n

\u2022 Every trust is unique, and the nature of the parties\u2019 interests in the trust property is a question of fact to be determined by the court.
\n\u2022 Ultimately, the greater control a party have over the trust and the greater the contributions made to the trust assets, the more likely it is to be included in the asset pool.<\/p>\n

If you have questions about trust and whether the assets of the trust form property of the parties, contact us to book an initial consultation. with one of our experienced family lawyers, and we will provide you with tailored advice with respect to your unique circumstances.<\/p>\n

Contact Us<\/h3>\n

To speak to one of our experienced Family & De Facto<\/a> lawyers call\u00a01800 999 529<\/a>, email\u00a0mail@rmold.newwebsite.live<\/a>\u00a0or submit an enquiry below.<\/p>\n

We are available to meet with you at any of our local offices (Brisbane, Gold Coast, Beenleigh, Cleveland and Jimboomba<\/a>) or by telephone or video-conference.<\/p>\n

This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.<\/em><\/p>\n

_______________________________
\n\u00b9Duff and Duff (1977) FLC 90-127; [1977] FamCA 24.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Reverse mortgages are known to be a \u201clast resort\u201d for retirees and pensioners. The main reason for this low usage of reverse mortgages is due to the risk of will disputes between beneficiaries and reduced equity later in life.<\/p>","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[1],"tags":[],"expertise":[267],"class_list":["post-26455","post","type-post","status-publish","format-standard","hentry","category-uncategorized","expertise-family-de-facto-law"],"acf":[],"_links":{"self":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts\/26455","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/comments?post=26455"}],"version-history":[{"count":2,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts\/26455\/revisions"}],"predecessor-version":[{"id":28290,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts\/26455\/revisions\/28290"}],"wp:attachment":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/media?parent=26455"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/categories?post=26455"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/tags?post=26455"},{"taxonomy":"expertise","embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/expertise?post=26455"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}