Family trusts and relationship breakdowns: Why control matters after Caldwell

Caldwell is a timely reminder that trust ownership is only part of the picture in family law proceedings. The Court’s focus on practical control underscores the importance of appointor powers, trustee control and trust governance arrangements. For families with discretionary trusts, the decision highlights the need to review how wealth structures are controlled, not just how they are owned.

For families who use discretionary trusts to hold and protect intergenerational wealth, the recent decision in Caldwell & Caldwell [2026] FedCFamC1A 81 is an important reminder: trust assets may be scrutinised in family law proceedings where one spouse has practical control over the trust.

Trusts have long been regarded as redoubtable dreadnoughts. With good reason, they are often the vessel of choice for valuable cargo — including effective tax planning, asset ownership, estate planning and asset protection. However, in the event of relationship breakdown, the reach of the Family Law Act 1975 may test how watertight those structures really are.

When a new partner becomes connected to the family fortune, whether by marriage, cohabitation or a developing romance, the existence of a Binding Financial Agreement made before or during the relationship may help protect that family wealth from uncertainty. Caldwell was not about Binding Financial Agreements; none were in existence in this case. Rather, it concerned the intersection of trusts and family law and what happens when there is no plan that contemplates relationship breakdown.

Why does Caldwell matter for families with discretionary trusts?

Over the last two decades, Family Law Courts have become increasingly willing to examine discretionary trust structures and, in certain circumstances, characterise assets held in trust as matrimonial property. In doing so, they have challenged long-held assumptions about the immunity of trusts and trustees established to preserve intergenerational wealth. The difficulty, and the source of judicial attention, is that one party may insist the wealth is not theirs but at the same time retain a significant capacity to determine who ultimately gets to enjoy it.

The attention given to Caldwell, an appeal case decided in May 2026, may suggest that something fundamental has changed. It has not. The decision is significant, particularly for families with substantial intergenerational wealth held in discretionary trusts, but it is better understood as a reaffirmation of principles that have been developing over time. Read alongside the earlier decision of Kennon v Spry [2008] HCA 56, Caldwell is less a revolution than a reminder of established principles: when questions of trust and family law intersect, the Courts are concerned not only with questions of ownership, but also with questions of power and control.

What did the Court consider when assessing control of the trusts?

Kennon taught that it is not enough to ask who built the house. Caldwell reminds us to ask who holds the keys.

For families using trusts to preserve wealth across generations, the case highlights why the person who controls the structure may be just as important as the person who originally contributed the wealth.

The competing arguments in Caldwell reflect a tension familiar to many wealthy families: if wealth is held in a trust, but one spouse has the practical ability to control that trust, should the trust assets still be treated as separate from the relationship?

The husband’s case began with the history of the trusts. Three trusts had been established by his father to hold wealth accumulated over successive generations, starting with his great-grandfather. The husband’s father died, the husband inherited control over the three trusts, and the parties then separated.

At the initial trial, it was agreed unanimously that the family’s wealth was not created nor accumulated by either spouse – it existed in greater part before the marriage. The trust structures were clearly intended to preserve wealth across generations, and the separate wealth in the parties’ matrimonial pool was significant by itself. No direct distributions from the trusts had been made to the husband or the wife during their marriage, and by the time of the proceedings, the wife had already been consigned to a class of excluded beneficiaries. Amendments made to the trust deed during the marriage provided that only direct lineal descendants of the great-grandfather would benefit from the family’s wealth.

During the initial trial, the husband submitted that despite the apparent power conferred upon him as appointor of the trusts, and his control over the trustee, he was nevertheless constrained by fiduciary obligations and the powers were not personally his.

On that view, the family trusts appeared to occupy a world far removed from the marriage itself.

The wife’s arguments focused less on where the family wealth came from, and more on the power the husband had, or could potentially exercise, over it. The husband was an object of all three trusts. He was also a joint appointor and had the power to remove his co-appointors, who were the parties’ adult sons. During the husband’s father’s lifetime, steps had been taken that resulted in the control structure in place at the time of the proceedings. Through voting rights attached to shares in the trustee companies, the husband also possessed a significant capacity to influence the administration of the trusts and the identity of those responsible for managing them.

The Full Court observed plainly: “This capacity to control the trustee gives the husband effective control of the trusts.”

What did the Full Court’s finding on control mean?

The existence of power is not disproved by the courtesy of its restraint.

• Importantly, the Full Court’s conclusion did not determine whether the trust assets should ultimately be divided or adjusted between the parties. That question was remitted to the primary judge.

The husband had full control of the family’s wealth held in the trusts whether he chose to exercise those powers within his fiduciary duties, beyond them, or not at all. Caldwell suggests that, where substantial powers of control exist, the distinction between controlling wealth and owning it may become difficult to maintain because the question becomes more theoretical than real.

• That may be the most significant lesson to emerge from Caldwell. For families with discretionary trusts, the decision highlights the importance of looking beyond who legally owns the assets and considering who ultimately controls the structure.
• The case does not establish that every discretionary trust controlled by one spouse will be divided upon separation. What it does demonstrate is that where practical control exists, to remain outside of a matrimonial pool, trust assets must first withstand the threshold inquiry of whether there is a gatekeeper holding all the keys. Questions of fairness, contribution and adjustment (if any) come later.

Being fortunate enough to have farsighted and benevolent ancestors means some families enjoy wealth preserved across generations. The question for the Full Court was whether possession of the keys makes the manor, for the purposes of the Family Law Act, matrimonial property.

Families who hold wealth through discretionary trusts should regularly review both ownership and control arrangements. Macpherson Kelley’s Family Law and Private Clients team can help assess whether your current structures remain fit for purpose.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.