Preserving Intergenerational Wealth Reconsidered: Key Implications of the Full Court’s Decision in Caldwell and Caldwell
The decision at first instance in Caldwell and Caldwell supported the position that discretionary trusts can be a useful tool in preserving intergenerational wealth from the scrutiny of the Federal Circuit and Family Court (Caldwell 1).
Caldwell 1 considered the origin and purpose of the wealth derived by discretionary trusts in question, and it was held that the assets of those trusts were, in the circumstances, a financial resource of the husband. However, assets of those trusts were not considered to be ‘property’ of the husband for the purposes of the family law proceedings.
The wife appealed the decision in Caldwell 1.
Caldwell and Caldwell [2026] FedCFamC1A 81 (Caldwell 2)
The recent decision in Caldwell 2, set aside the primary judge’s findings in Caldwell 1, declaring that the assets of three discretionary trusts were ‘property’ of the husband for the purposes of section 79 of the Family Law Act 1975 (Cth) (Act).
The Court considered that the trail judge had conflated two key questions in Caldwell 1, being:
whether the trust interest constituted ‘property’ of a party; and
whether, and to what extent, an adjustment should be made in respect to that property.
In reaching its decision the Court emphasised that these questions are separate considerations and must be dealt with sequentially. The Court also highlighted that even where a trust and its assets are property of a party, an adjustment does not necessarily follow as a matter of course. Additionally it was noted that there are certain circumstances where assets derived from intergenerational wealth will not be considered assets of a party for the purposes of family law proceedings.
The Court focused on the powers that the husband possessed and the practical effect of those powers in respect of the level of control he could exert over the assets of the trust. The Court considered that the husband’s power extended beyond the mere expectation of benefit on the basis that he was able to influence the appointment of trustees, remove office holders and affect the administration of the trusts. Specifically, the Court considered the following, the husband:
could remove the parties’ adult sons as co-appointors or principals of the trusts;
held voting rights in respect of the shares in the trustee companies;
was a beneficiary of the trusts and the trust deeds permitted distributions to the husband.
The powers conferred on the husband, notwithstanding that those powers had not been exercised, were sufficient to support that the husband held a level of control over the assets of the trusts. Therefore, the Court held that the assets of the trusts were property for the purposes of the Act.
The decision in Caldwell 2 reaffirmed that effective control and the ability to benefit from assets of discretionary trusts remain central to whether trust assets are categorised as property. While the origin of wealth and the intention and purpose of trusts are relevant in assessing contributions made by the parties, those considerations do not necessarily prevent the trust assets from first being categorised as property for the purposes of the Act where sufficient control exists.
For more information, please contact:
Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal
Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal
This article was prepared with the assistance of Philippa Duniam, Law Clerk.
