Trust Structures in Divorce and Separation
Navigate trust structures in divorce with clarity and confidence.
What Gold Coast Families Need to Know
Trust Structures in Divorce and Separation
If you’re going through a separation, you may be wondering:
“Are assets held in a trust safe from being divided?”
It is a fair question, especially if you or your ex is involved in a family trust, business trust, or discretionary structure. Trusts are commonly set up for tax benefits, asset protection, or intergenerational wealth planning. But in the eyes of the Family Court, trusts are not automatically excluded from property division.
Furthermore, courts closely examine the history of contributions made to the trust, including initial capital injections, sweat equity, and unpaid labor by either partner during the relationship. Understanding how these historical contributions intersect with modern control tests is vital for protecting your financial interests.
Whether you are a trustee, appointor, beneficiary, or simply connected to someone who manages a trust, it is essential to understand how courts in Queensland deal with these arrangements during divorce. At Collective Family Law Group, we help clients across the Gold Coast navigate these complex issues with confidence.
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What Is a Trust, and How Does It Work in Family Law?
A trust is a legal structure where one person or entity (the trustee) holds property for the benefit of others (the beneficiaries). There are several types of trusts commonly seen in family law matters:
- Family (Discretionary) Trusts: The trustee decides how income or capital is distributed. Often used by families and small businesses on the Gold Coast.
- Unit Trusts: Beneficiaries (unit holders) have fixed entitlements to income and capital.
- Testamentary Trusts: Created by a will and activated upon death.
- Hybrid Trusts: Combine features of both fixed and discretionary trusts.
When determining whether trust assets should be divided in a property settlement, the Family Court doesn’t just look at who owns the assets on paper, it looks at who controls the trust and who benefits from it.
How to Protect Your Position if You Have a Trust
Seek Early Legal Advice
Don’t wait until proceedings begin. At Collective Family Law Group, we can review your trust structure, assess your exposure, and help you prepare for any risks.
Review the Trust Deed
Understand the fine print, especially who the appointor is and how beneficiaries are defined. Small clauses can have big consequences.
Assess Your Role
Are you just a beneficiary, or do you hold real power over decisions? Courts focus on control. Even informal influence (e.g., giving instructions to a passive trustee) can count.
Keep Detailed Records
Document decisions, asset movements, and distributions. Inconsistencies or missing paperwork can weaken your credibility.
Avoid Restructuring Without Legal Guidance
Making changes to the trust structure during separation, even with good intentions, can backfire. Always get advice before adjusting roles, assets, or beneficiaries.
Meet Some Of Our Family Lawyers
Dannielle Young
Hayder Shkara
Ivy Lawrence
Common Gold Coast Scenarios
You control a family trust that owns two holiday homes
Even if they’re “owned” by the trust, if you are both the trustee and appointor, the court may classify the properties as your assets.
You are a beneficiary in your parents' trust
If you’ve never received a distribution and have no control, the trust likely won’t be classed as property. However, it may still be seen as a financial resource that supports your future.
Your ex transferred business shares into a trust before separation
If this appears strategic, the court may reverse the transfer and include the shares in the asset pool.
What If Your Ex Controls the Trust?
You still have rights. Through your lawyer, you can:
- Request full disclosure of the trust deed and financials
- Apply for subpoenas to accountants, banks, and business partners
- Seek injunctions to stop assets from being moved
- Ask the court to draw adverse inferences if disclosure is lacking
With the right legal strategy, it’s entirely possible to expose misconduct and reclaim your fair share.
How Courts in Australia View Trust Assets
When assessing trust-related interests, courts consider two main questions:
- Is the trust property?
- If yes, it can be added to the asset pool and divided.
- Is the trust a financial resource?
- If yes, it may influence the final percentage split, even if not technically divided.
Factors that influence the court’s view include:
- The language of the trust deed
- Who the appointor is (the person who can hire/fire trustees)
- Your role (trustee, beneficiary, controller)
- Whether the trust was established during the relationship
- Any recent changes in trust structure or asset holdings
Valuing Trust Assets in Property Settlements
Trust valuations are rarely straightforward. The court may order:
- Independent valuations of trust-held property
- Review of net assets, liabilities, and asset liquidity
- Assessment of any loans between the trust and related parties
- Examination of unit values in unit trusts
Disputes often arise if a party claims the trust has little value or if there are inconsistencies in financial statements. Forensic accountants are frequently engaged to clarify the true position.
Busting Common Myths About Trusts in Divorce
“If it’s in a trust, it’s protected.”
Not necessarily. Courts look at who has control and who benefits, not just the legal title.
“I changed the deed. That protects it.”
Changes made to hide or shield assets around separation can be reversed under Section 106B.
“It’s my parents’ trust, not mine.”
Even if you don’t control the trust, courts may treat it as a financial resource that supports your lifestyle, impacting the final outcome.
Key Takeaways for Gold Coast Families
- Trusts aren’t off-limits in property settlements.
- Control and benefit are more important than ownership on paper.
- Sudden changes to trusts around separation are a legal red flag.
- Early legal advice is your best defence.
Transparency and proper documentation can protect your position.
Red Flags Courts Watch For
If a trust appears in your separation, the court may look closely at:
- Changes to the trust deed or beneficiaries near the time of separation
- Transferring major assets (e.g., Gold Coast investment properties) into the trust
- Appointing family members as trustees to limit disclosure
- Loans or payments between the trust and related parties
- Use of crypto or overseas holdings via trust structures
Any action that appears aimed at reducing the property pool can be challenged in court.
Section 106B of the Family Law Act: Reversing Trust Transactions
This section allows the Court to undo transactions designed to defeat a family law claim. It’s particularly relevant when trust deeds are altered during separation.
- Examples of reversible actions include:
- Moving a marital home into a trust post-breakup
- Transferring business assets into a trust to keep them off the books
- Resigning as trustee and appointing a relative to block access
If these transactions are seen as attempts to reduce your ex’s entitlements, they can be set aside by the court.
Why Control Is More Important Than Legal Ownership
It’s not enough to say, “The trust owns the property, not me.” The Court will ask:
- Do you control the trust?
- Are you likely to benefit from it?
In the landmark case of Kennon v Spry [2008], the High Court ruled that even though Dr. Spry made changes to exclude himself and his wife as beneficiaries, he still controlled the trust and stood to benefit. The Court reversed the trust changes and included the assets in the property pool.
This case remains one of the clearest examples that control, not just title, determines how trusts are treated in divorce.
Case Examples That Still Shape Outcomes Today
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Kennon v Spry [2008] HCA 56
Dr. Spry varied a discretionary trust to exclude both himself and his wife as beneficiaries, then transferred assets to new trusts for their children. The High Court, applying s 106B of the Family Law Act, set aside those transactions because they were designed to defeat the wife’s claim. The Court treated the trust interests as part of the property pool, focusing on Dr. Spry’s continuing control and potential to benefit.
🔑 Lesson: You cannot shield assets by changing a trust deed or shifting property into new trusts around separation if you still hold real control.
In the Marriage of Davidson (No 2) (1991) 101 FLR 373; FLC 92-197
In this case, the husband exercised effective control over a family trust and regularly used its income for his own purposes. The Court looked past the legal title and treated the trust assets as part of the property pool.
🔑 Lesson: Courts focus on substance, not form. If you control a trust and use it for personal benefit, its assets may be treated as yours in a settlement.
Ashton v Ashton (1986) FLC 91-777
The husband had almost complete control of a family trust, to the point where it operated as his alter ego. Because of this dominance, the Court held that the trust assets should be included in the property pool.
🔑 Lesson: If a trust is essentially a puppet of one spouse, the Court is likely to treat its assets as divisible property.
Harris & Dewell and Anor [2018] FamCAFC 94
This matter involved a unit trust where the husband’s father was the sole unitholder. Although the husband had some influence, he had no legal entitlement to distributions. The Full Court decided the trust was not property of the parties but classified it as a financial resource relevant to the settlement outcome.
🔑 Lesson: Control alone is not enough. Unless you have a legal right to benefit, trust assets may be excluded from the property pool but still affect the final division as a financial resource.
Why Choose Collective Family Law Group?
At Collective Family Law Group, we work with Gold Coast families facing property settlement disputes involving complex trust structures. Our team understands how to decode trust deeds, identify control, and secure fair outcomes.
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Are assets held in a family trust protected during a divorce in Australia?
- Not automatically. While a trust is a separate legal entity, the Family Court looks beyond formal ownership to examine who controls the trust (such as the appointor or trustee) and who benefits from it. If a party has effective control or entitlement, the court can treat trust assets as part of the matrimonial asset pool or as a financial resource.
What is the difference between legal ownership and control in a trust?
- Legal ownership means the trustee legally holds the property on behalf of the trust. Control refers to who has the power to appoint trustees, change the trust deed, or dictate how income and capital are distributed. In family law, control is often heavily weighted by the court when determining property settlements.
Can the Family Court unwind or change a trust structure?
- Yes. As seen in landmark rulings like Kennon v Spry, if the court finds that a trust was used to shield assets or that one party maintains total control, it has the broad power to set aside asset transfers, alter trust arrangements, or include trust property in the final division.
What happens if my ex-partner controls a family trust?
- You still have legal rights. Your family lawyer can request full financial disclosure of the trust deed and accounts, issue subpoenas to third-party accountants or banks, and seek court injunctions to prevent the transfer or concealment of trust assets during separation.