Family Trusts and Property Settlements
Family trusts are a common structure used in Australia to manage wealth, minimise tax, and protect assets. They are often set up to distribute income to family members on lower tax rates — for example, adult children in tertiary study or retired grandparents. Another key benefit of a trust structure is the level of asset protection it provides against business or personal risks.
However, in the context of family law property settlements, family trusts do not always provide the level of protection people expect. Since the landmark decision of the High Court of Australia in Kennon v Spry (2008), it has been clear that the assets of a family trust — even those established before the marriage — may be treated as property of the parties and therefore taken into account when dividing assets after separation.
How Family Trusts Are Treated in Family Law
When considering a family trust in a property settlement, the court may look at factors such as:
- Who controls the trust (e.g. who is the trustee or appointor)
- The extent to which the parties have benefited from the trust during the relationship
- Whether the trust was established before or during the marriage/de facto relationship
- The way in which trust income and assets have been distributed or used
Depending on the circumstances, the trust assets may be:
- Included in the property pool to be divided, or
- Taken into account as a financial resource, even if not directly divided
Strategies for Protecting Assets in Family Law Matters
While no structure provides absolute protection in the event of separation, there are strategies that can reduce risk, such as:
- Careful structuring of trusts, trusteeships, and appointor roles
- Binding financial agreements (sometimes referred to as “pre-nups” or “post-nups”)
- Strategic estate and succession planning
- Ensuring clear records of contributions to the trust and its assets
How Parke Lawyers Can Help
At Parke Lawyers, our expert family law team can advise you on:
- How a family trust is likely to be treated in your property settlement
- The potential risks and outcomes based on your individual circumstances
- Strategies to help protect family wealth and manage trust assets responsibly
- Negotiation or litigation where family trust assets form part of a disputed property pool
Family trusts are complex and require careful handling in family law disputes. With our experience in both family law and commercial matters, Parke Lawyers is uniquely placed to give you practical, strategic advice to protect your interests.
