What happens to our Trust in our Property Settlement

Dealing with a Trust in your Property Settlement

If assets are held in a Trust, an important issue arises as to how that Trust is dealt with in a Property Settlement.

A Trust is an arrangement where assets are held in the name of a Trustee on behalf of the Beneficiaries named in the Trust Deed.

When deciding an Application for Property Settlement, the Court has a broad discretion as to what it may find to be the property of the parties.

Family Trusts & Property Settlement

The Court has frequently decided that assets held in a Family Trust are to be treated as property to be divided between the parties.

A Family Trust, often a Discretionary Family Trust, is sometimes used as:

 

 

• a way of distributing income from a business;
• a means of asset protection.

A beneficiary of a Trust is not the legal owner of assets of a Trust until they are distributed by the Trustee.

What Courts want to know about Trusts in Property Settlement Applications

When deciding whether the assets of a Family Trust should be considered property and divided as part of the property settlement, the Court will consider the:

• terms of the trust;

• identity of the trustees and beneficiaries;

• if the trustee is a company, who has control of the trustee company;

• identity of the appointment or principal of the trust;

• the class of beneficiaries within the trust;

• assets held within the trust;

• how the trust assets were acquired and financed;

• history of the trust and distributions from the trust;

• relationship between the parties to the trust, for example the trustee and beneficiary;

• income created from trust assets, and how this is distributed;

• income distributed since separation.

 

Court Orders about Trusts in Property Settlement

The Court has a wide discretion to make orders in relation to a trust.

The Court can order that a beneficiary relinquish their interest in a trust, and that the trust deed be amended reflect this.

 

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