Overview 

Caldwell v Caldwell [2026] FedCFamC1A 81 concerns intergenerational wealth held in discretionary trusts, and a question as to whether the trust assets constitute ‘property’ under section 79 of the Family Law Act. This issue is significant: if trust assets are characterised as property, they may be brought into the property pool for division in a financial settlement. On appeal, the majority of the Federal Circuit and Family Court found that the trust assets were property within the meaning of section 79, while Strum J, in dissent, took the opposite view. All judges agreed that control of the trusts was a prerequisite to a finding of property in this context, however, the degree of control was contentious.  

Background  

The husband’s great-grandfather started a family business in the early 1900s. It was later carried on by his grandfather, and then his father, who established three discretionary trusts – the B Trust, C Trust and the D Trust. The husband’s father held sole control over the trusts as appointor and sole holder of voting shares in the corporate trustees. Following the death of the husband’s father in late 2022, the business was primarily run by the husband and his two sons.  

Despite this purported joint control, the husband retained several mechanisms which allowed him to maintain effective control. Namely, the husband held the A class shares in all three trustee companies, with his name appearing first on the register. The trust deed stipulated that only the first-name joint shareholder had the power to vote at a general meeting, meaning the husband had the power to appoint and remove directors, and to remove either son from their role at any time, with no explanation. Further, the trust deeds permitted him to confer a benefit upon himself.  

Following the separation of the husband and wife in early 2022, the wife sought a declaration that the trusts were property and as such, should be added to the property pool for potential division. Relying on previous Full Court decisions, the wife argued that control and the ability to benefit from a trust are, on their own, enough to characterise its assets as property.  

Primary Judgment  

The primary judge determined that the trust assets were not the husband’s property. While acknowledging the husband had essentially unfettered discretion to control and benefit from the trusts, the decision turned on the history, intention, and purpose of the trust. The primary judge found, among other things, that the primary purpose of the trust was to ‘facilitate the intergenerational management of the families… business for the benefit of future generations’. The judge also found that the trust assets originated from wealth build-up of the husband’s father and his predecessors. Further, there was no evidence of the husband’s intentions to control the trusts. These factors weighed in favour of the trust assets not being characterised as property. The wife appealed the decision. 

The Appeal  

The appeal was granted, and while all judges agreed that control of the trust is central to whether trust assets are property, the majority and dissenting position diverged on what that control inquiry involves.  

The majority determined that the primary judge had conflated two questions into one. Firstly, whether the trust assets were property, and secondly, if so, whether any adjustments should be made in respect of them. Importantly, it was noted that a characterisation of ‘property’ did not mean any adjustment in interest would necessarily follow.  

Through that logic, the primary judge had incorrectly determined the status of the trust assets. The husband’s power of appointment, ability to remove trustees, and the trust deeds’ failure to restrict his capacity to benefit himself weighed heavily in favour of a property characterisation. This unimpeded ability to unilaterally control the trusts, they found, was indicative of the trusts being the husband’s property, despite the husband historically never utilising this power.  

However, in dissent, Strum J found the trust’s purpose was to perpetuate the family business, which conflicted with the wife’s proposal that the husband seize control to create a property interest. Strum J held that the husband’s unexercised capacity to control the corporate trustee of each of the trusts did not amount to effective present control. The mere absence of any impediment to him assuming control was not the same as actually holding it. A finding otherwise would effectively create new property interests that do not presently exist. 

In essence, the majority ultimately confined the property characterisation to control and capacity to benefit, leaving purpose and origin for the adjustment stage; whereas Strum J considered broader factors such as history, purpose and origin as informative to the characterisation itself, and not just relevant to adjustments. 

Why does this matter/ what does this mean?  

In Caldwell, the question of whether the wife gets a share of the trust assets is yet to be decided. However, the trusts are now in the property pool. Importantly, if Caldwell has a message, it is that the treatment of discretionary trusts in family law contexts will be fact-specific and the law is not settled.  

Nicholes Family Lawyers has extensive experience in complex asset protection, including third-party interests, discretionary trusts and corporate entities. Should you require any advice about your situation, please contact our office on (03) 9670 4122 to arrange an initial consultation.