This is one of the most contested issues in high-net-worth family law. The short answer is: yes, the Family Court can and regularly does take trust assets into account in property settlements — but how it does so depends on the specific circumstances of the trust, who controls it, and what benefits a party has historically received from it.
The legal starting point
A family trust is a separate legal entity. A party to a property settlement does not legally own trust assets — the trustee holds them. This means trust assets cannot simply be added to the asset pool and divided as if they were personally owned. The Family Court, however, has developed a sophisticated approach to trust interests that goes well beyond the strict legal form.
The ‘financial resource’ approach
Under section 75(2)(b) of the Family Law Act, the court can take into account the financial resources of each party — not just their assets. Where a party is a trustee or appointor of a discretionary trust, or a beneficiary who has consistently received distributions, the court may treat the trust as a financial resource available to that party. This can influence the percentage adjustment made in the other party’s favour at Step 3 of the property settlement process.
When the court goes further: the alter ego approach
In cases where a party effectively controls a trust — as sole or primary trustee, as appointor, and as a beneficiary who treats trust assets as their own — the court may find that the trust is, in substance, the party’s alter ego. In those circumstances, trust assets can be included directly in the asset pool under section 79 of the Family Law Act, rather than merely treated as a financial resource. The leading cases in this area make clear that the court will look at the practical reality of control, not just the formal legal structure.
Protective structures and their limits
Trusts established before a relationship, or trusts where third-party beneficiaries (such as elderly parents or adult children) hold genuine interests, are more likely to be treated as separate. Pre-existing trusts with a genuine protective purpose are harder to attack than structures that were clearly established during the relationship to hold family wealth. The timing and purpose of the trust’s establishment will always be scrutinised.
Questions to consider
• Who are the trustees and appointors of the relevant trusts — and does one party hold both roles, giving them effective unilateral control over the trust’s assets and distributions?
• What distributions have historically been made from the trust to each party, and over what period? A pattern of consistent distributions is strong evidence of a financial resource.
• When was the trust established, and what was its stated purpose? A trust created during the relationship with one party’s assets is more vulnerable to inclusion than a pre-existing structure with genuine third-party interests.