Families hold wealth in many different ways. As financial arrangements become more complex, there’s increasing focus on how assets are preserved across generations and, importantly, how they’re treated if a relationship ends. This is driving a stronger crossover between estate planning and family law, with many of our clients seeking clarity around how trusts operate, how inheritances are treated, and what steps can support long-term asset protection.
The first-instance decision in Caldwell & Caldwell [2025] FedCFamC1F 506 provided a notable example of a court excluding family trusts and intergenerational wealth from the property pool in a marital dispute. This outcome led many advisors and families to view structured discretionary trusts as highly resilient against family law claims. However, the recent successful appeal in Caldwell & Caldwell [2026] FedCFamC1A 81 overturned that ruling. It highlighted that courts will look closely at who actually controls the trust in a separation and is a reminder that early planning gives families greater control and clearer expectations.
The case history and appeal
The matter involved a couple who separated in early 2022 after a 30-year marriage and divorced in 2023. While the matrimonial asset pool was already substantial (valued between $16 million and $22 million), the dispute centred on three discretionary family trusts and several companies holding significant assets, including an intergenerational family business established by the husband’s great-grandfather in the 1900s. These assets were the result of four generations of growth and were not created or increased through the efforts of the parties during the marriage.
Following his father’s death, the husband and his two adult sons acted as joint appointors of the trusts, holding shared authority to appoint or remove trustees. Due to the husband’s central involvement, the wife argued that the trusts should be included in the matrimonial property pool under section 79 of the Family Law Act 1975 (Cth).
The husband did retain the power to remove his sons as co-appointers if needed; however, he never exercised this power, had taken no trust distributions, and had a side arrangement promising not to remove his sons as joint appointors. The wife had become an excluded beneficiary in 2019 and could not receive any benefits from the trusts.
Relying on these factors, the court initially found that the trust and assets were not the property of the parties and should be excluded from the marital property pool. It found that the purpose of the discretionary trusts and assets was for the direct descendants of the husband’s father and to keep the intergenerational family business in the Caldwell family.
The wife appealed this decision, taking the matter to the Full Court of the Federal Circuit and Family Court of Australia. The Full Court allowed the appeal, completely overturning the trial judge’s ruling and declaring that the trust assets are to be treated as property of the husband for family law purposes.
Why the court overturned the decision
In reaching this decision, the Full Court shifted its focus to who holds the actual day-to-day control over the trust structure. Several key factors influenced this ruling, including:
- The husband held specific voting rights and structural powers that gave him the legal capacity to manage the trusts and benefit from them.
- The court emphasised that it doesn’t matter if a person has never actually distributed trust money or assets to themselves in the past; their legal right to do so is what matters.
- The husband retained the ultimate power to remove the other co-appointors without consent, giving him the ability to assume sole control over the assets.
- The court established that a party cannot shield assets from a property pool simply by choosing not to exercise the powers available to them.
What this means for your estate and succession planning
This appeal highlights the importance of careful estate and succession planning, particularly for families with trusts, businesses or intergenerational wealth. It highlights that:
- The way a trust is structured, governed and controlled will influence how it’s treated in family law proceedings.
- If you hold the legal power to access or control trust assets, the court may treat them as yours.
- Keeping money in a trust is not enough to protect it without a proactive legal strategy.
- If you set up or relied on trust structures based on the 2025 trial ruling, you should review your succession plan to safeguard family assets.
Essentially, this ruling further highlights that estate planning and family law are increasingly connected, and decisions made in one area can shape outcomes in the other.
How Seton Family Lawyers can help
We work closely with clients who are navigating the relationship between family wealth and family law. Whether you’re a parent wanting to preserve assets for your children or you’re planning your estate, tailored advice gives you clarity and direction.
We help clients understand the implications of trusts and inheritances and make informed decisions that support long-term family goals. For many clients, this planning provides a sense of security and confidence about the future.
If you need help with estate planning and family law to protect your family, our team is here to guide you through the next steps.
