When can assets held in discretionary family trusts be treated as “property” of a party to a marriage?

Full Court revisits Caldwell

In May 2026, the Full Court in Caldwell & Caldwell [2026] FedCFamC1A 81 (Caldwell) revisited the issue of discretionary family trusts, overturning the trial judge’s decision and refocusing the enquiry on a familiar question ─ "who has control?"

Background and first instance decision

The dispute in Caldwell centred on three discretionary family trusts established by the husband’s father, which held wealth built up over multiple generations of the Caldwell family.

In a discrete-issue trial, the wife sought a declaration that the trusts were property of the husband, which would bring the trusts within the pool of assets available for division between the parties. She relied on the husband’s control over the trusts, including his powers to appoint or remove trustees.

The trial judge, however, ultimately found that the trusts were not property of the husband. While acknowledging that the husband had both a degree of control and the capacity to benefit, those factors were not treated as determinative. Greater weight was given to the broader context, including the intergenerational purpose of the trusts, the origin of the assets of the trusts, and the legal constraints on the husband’s powers, such as fiduciary duties and the proper purpose rule.

The appeal

The wife appealed, and the majority of the Full Court allowed the appeal. The Court set aside the primary judge's findings and instead concluded that the trusts were the husband's property.

At the centre of their reasoning was a fundamental error in approach by the trial judge. The trial judge was found to have conflated two distinct questions:

1. whether the trusts were “property” of a party; and
2. whether it would be appropriate to make any adjustment in respect of those assets.

The majority judgment emphasised that these are separate and sequential questions. Importantly, identifying an asset as property of a party does not mean any adjustment of interests in that asset will follow.

In concluding the trusts were the husband's property, the Court's analysis turned on a familiar question: who really controls the trusts?

Control and capacity to benefit

Significant weight was placed on the husband’s effective control of the trust structure. His power of appointment ─ the power to remove and appoint trustees ─ supported a finding of effective control.

Although the husband argued that he had not taken the necessary steps to exercise those powers, the Court made clear that this was not determinative. The relevant enquiry is whether the power can be used, not whether it has been used. As there was nothing preventing the husband from taking control of the trusts at any time, he was found to have effective control of the trusts.

This approach reflects established authority in respect of characterisation of trusts: although the analysis is fact-specific, the absence of control and a capacity to benefit will generally weigh against trust assets being treated as property.

It should be noted that Justice Strum dissented on this point, taking the view that the husband’s unexercised powers were not by themselves sufficient to establish present control. His Honour considered that additional steps would have been required for the husband to “seize” control of the trusts, such that the wife's case was, in substance, directed to compelling the creation of new property interests, rather than identifying existing interests.

Purpose and origin of the trust assets

The majority also revisited the primary judge’s reliance on the purpose of the trusts and the origin of their assets. While those factors had been central at first instance, the Full Court held that they are directed to subsequent questions of contributions and adjustment, rather than the threshold issue of whether the trusts are property.

Justice Strum in dissent considered that it was open to the primary judge, having regard to those features and the totality of the evidence, to conclude that the trusts fell outside the property pool.

Key takeaways

The appeal decision in Caldwell emphasises that the threshold task of identifying whether an asset is “property” must be kept separate from the later question of whether any adjustment should be made.

The decision confirms the central questions when determining whether a trust is property: who has control, and who can benefit. Where a party holds powers that allow them to assume control of a trust, that may be sufficient to justify characterisation as property, even if those powers have not been exercised.

The judgment further confirms that factors such as the origin of the assets of a trust, the purpose of the trust, and the broader structural considerations are relevant matters to be considered in terms of contributions and adjustments (if the trust is property), rather than being determinative of the characterisation of a trust.

The decision also highlights that the characterisation exercise remains fact-specific. As the dissent decision demonstrates, reasonable minds may differ, particularly where control is contingent upon further steps being taken.

Lander & Rogers' family lawyers have extensive experience navigating complex asset structures, including discretionary trusts, corporate entities and third‑party interests. If you require assistance addressing these issues, or are considering a review of your asset protection arrangements, we encourage you to contact a member of our Family & Relationship Law team.