It is often the case in Family Law matters that the financial structure of a family will include a Discretionary Trust. There has been a long standing debate as to what extent the assets of a Trust constitute property for the purposes of family law proceedings under the Family Law Act (“FLA”).
We out hereunder are some helpful hints as to the way the property of a Trust is treated under the FLA.
Section 79 FLA gives a wide discretionary power to a Court to vary the interests in any property of parties to a marriage.
The decision as to whether an interest in a Trust constitutes “property” under the FLA, depends upon the facts and circumstances of each case. However of particular significance is the recent High Court decision in Spry and Kennon wherein the High Court confirmed that if a party to a marriage has the power to remove and appoint the trustee then the assets of that Trust can be held to be “property” of the marriage. The “trust” is seen as the “alter ego” of that person.
It frequently happens that families do not provide their children with financial statements for a Trust, however any beneficiary of a discretionary Trust has a right to inspect trust documents (i.e. the Trust Deed and the Financial Statements) It is no excuse to say "my father (or mother) will not give the records to me".
‘[In the absence of] a specific application of Trust capital or income to one of the [beneficiaries] there was no equitable interest in its assets held by anyone [capable of valuation]'