Is Your Family Trust Protected?
- 3 days ago
- 5 min read
Updated: 2 days ago
What Caldwell v Caldwell Means for Business Owners
Many Esperance businesses operate through discretionary trusts, whether in agriculture, retail, services, or property. These structures are a standard part of business and succession planning, designed to protect assets, manage tax, and facilitate the eventual transfer of the business to the next generation.
But how robust are these structures when a family member divorces? Can a former spouse claim a share of trust assets accumulated over decades?
A July 2025 decision of the Federal Circuit and Family Court of Australia provides a significant answer. In Caldwell and Caldwell [2025] FedCFamC1F 506, the Court held that three discretionary trusts holding the assets of a multi-generational family business were not divisible property in a divorce. The trusts survived the claim. The decision offers practical guidance for any business owner who holds assets through trust structures.
What Happened in Caldwell
The Caldwell family operated a retail business established by the husband's great-grandfather in the early 1900s. The business had been carried on through four generations. Its assets were held across three discretionary trusts, each with a corporate trustee.
The husband's father was the sole appointor of the trusts and held all voting shares in the corporate trustees during his lifetime. When the father died in 2022, the appointor roles and trustee company shares passed to the husband and his two adult sons as joint tenants, pursuant to the father's will.
The wife and husband had been married for approximately 30 years. She was never a beneficiary of the trusts and had been explicitly excluded from the beneficiary class. The husband had never received a distribution from the trusts, although he worked in the family business and received remuneration, including through forgiven loans.
Following separation, the wife applied for orders that the trust assets be declared “property” of the parties under section 79 of the Family Law Act 1975 (Cth), and that the husband be directed to cause a cash distribution of 35 per cent of net trust capital to fund a settlement.
The Court's Decision
Justice Carew dismissed the wife’s application. The Court held that the discretionary trusts were not “property” within the meaning of section 4 of the Family Law Act. They were, however, “financial resources” under section 79(5), meaning the trust wealth remained relevant to the overall property adjustment but could not be directly divided.
The reasoning turned on several factors, each of which carries practical implications for any family holding business assets through discretionary trusts.
Six Factors That Protected the Trusts
1. Genuine intergenerational purpose
The trusts were established to facilitate the intergenerational management of the family business. The father's will expressly stated the intention that the business remain within the family and be controlled by the husband and his sons. The Court recognised this as a genuine purpose that constrained how trust powers could be exercised.
Practical takeaway: Review your trust deed. Does it articulate the purpose of the trust? If the trust exists to hold and transfer family business or farming assets across generations, that purpose should be documented, not assumed.
2. Shared appointor roles
The husband was one of three appointors, alongside his two adult sons. He did not have sole or effective control over the trusts. This weighed against treating the trust assets as his property.
Practical takeaway: Consider how appointor succession works in your structure. If the appointor role is concentrated in one person, it may be easier to argue that person has effective control. Distributing appointor roles across family members strengthens the protective function of the trust.
3. Wife excluded as beneficiary
The wife had never been included in the class of beneficiaries. Her exclusion was deliberate and documented in the trust deeds.
Practical takeaway: Check who is included in your trust’s beneficiary class. Many standard trust deeds include a broad default class that may capture spouses, de facto partners, or other relatives. If the intention is to limit beneficiaries to lineal descendants, the deed should reflect that clearly.
4. No distribution history
The husband had never received a distribution from the trusts. While he was remunerated for his work in the business, the trust capital itself had not been applied for his personal benefit. This supported the conclusion that he could not treat the trust assets as his own.
Practical takeaway: Distribution history matters. A pattern of distributions to a particular beneficiary during a marriage may undermine the argument that trust assets are separate from matrimonial property. Be deliberate about how and to whom distributions are made.
5. Fiduciary duties as a constraint
Even though the husband held significant powers, the Court recognised that exercising those powers for the purpose of benefiting the wife (who was not a beneficiary) would breach fiduciary duties owed to the broader beneficiary class, including his sons and other family members.
Practical takeaway: Trust powers come with obligations. Appointors and trustees owe fiduciary duties to all beneficiaries. The Court treated those duties as a real constraint on how the powers could be used, which weighed against classifying the trust assets as property.
6. Sufficient non-trust assets
The non-trust property pool was valued at between $16 million and $22 million. The Court found this was sufficient to achieve a just and equitable outcome without invading the trusts.
Practical takeaway: Where there are adequate non-trust assets to settle a family law claim, the Court is less likely to look through the trust structure. This factor supports maintaining a clear separation between personal assets and trust assets.
What Should You Do?
The Caldwell decision is not a guarantee that every discretionary trust will be protected in a family law dispute. It is a decision on its particular facts. But the factors the Court considered provide a practical framework for assessing whether your own structures are robust.
At a minimum, consider these questions:
When did you last read your trust deed? Does it reflect the current purpose and structure of the trust?
Does the deed articulate the intergenerational or business succession purpose of the trust?
Who are the appointors? Is the role shared or concentrated in one person?
Who is included in the beneficiary class? Are spouses or de facto partners included by default?
What is the distribution history? Have distributions been made that could blur the line between trust and personal assets?
What happens to the appointor role and trustee shares on death or incapacity? Does your will deal with this?
These are questions that warrant a careful review of the trust deed with a lawyer who understands both trust law and family law exposure.
How Opportuna Legal Can Assist
Opportuna Legal advises business owners and farming families on trust structuring, succession planning, and the interaction between family trust governance and family law exposure. If you would like to discuss whether your structures are fit for purpose, please contact Opportuna Legal.
This article is general information only and does not constitute legal advice. It is not intended to be relied on as a substitute for legal or other professional advice. Specific advice should be obtained for your particular circumstances.
Opportuna Legal
T: 08 6110 3748
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