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Home Insights Family trusts are not automatically protected in a property settlement – Caldwell & Caldwell [2026] FedCFamC1A 81

Family trusts are not automatically protected in a property settlement – Caldwell & Caldwell [2026] FedCFamC1A 81

June 27, 2026

Tom Zreika

The Full Court of the Federal Circuit and Family Court of Australia has reinforced an important principle for families and business owners who hold wealth through discretionary trusts.

In Caldwell, the majority held that three long standing family trusts formed part of the husband’s property for family law purposes because he held effective control over the trusts and possessed the power to benefit himself.

The Court found the trial judge had erred by confusing two separate questions.

First, whether the trusts were “property” under the Family Law Act.

Second, whether the wife should ultimately receive any adjustment from those assets.

Those issues had to be determined separately.

Sterling Takeaway

Many people assume assets held in a discretionary family trust are beyond the reach of the Family Court. Caldwell shows that assumption is unsafe.

Where a party has effective control of a trust and the power to appoint trustees or distribute assets for their own benefit, trust assets may be treated as property available for consideration in a property settlement, even if the trust was established generations before the relationship and was intended to preserve family wealth.

Every trust structure requires careful legal analysis before separation or litigation.

Caldwell & Caldwell [2026] FedCFamC1A 81 – published 11 May 2026