Implications of Caldwell’s case for Family Law

The Caldwell decision (Caldwell & Caldwell [2026] FedCFamC1A 81) delivered 11 May 2026 is significant because it strengthens the ability of Family Courts to treat discretionary trust assets as part of the matrimonial property pool where one spouse has effective control of the trust.Greater focus on control rather than ownership

The key practical implication is that courts will look beyond formal legal ownership and ask:

 Who can control the trust and who can benefit from it?

If a spouse has the power to appoint or remove trustees, appoint beneficiaries, or otherwise take effective control of the trust, the trust assets may be characterised as that spouse’s property, even if:

• they did not establish the trust;
• the assets originated from the wider family including previous generations; or
• they have not exercised those powers.

This potentially broadens the range of trust assets available for consideration in family law proceedings.

Family trust assets are more likely to be included in the property pool

Many wealthy families use discretionary trusts to hold business, investment and intergenerational assets.

Following Caldwell, parties can expect increased scrutiny of:

• trustee structures;
• appointor powers;
• succession arrangements; and
• beneficiary entitlements.

A trust will not be protected from scrutiny simply because it was established by parents or grandparents or was intended as an intergenerational wealth vehicle.

Characterisation and division are separate questions

One of the most important legal clarifications is that:

1. Is the trust assets the property of a party?; and
2. Should the court alter interests in that property?

are separate enquiries.

This means that trust assets may be included in the asset pool, but a court may still decide that:

• the other spouse should receive little or no adjustment in respect of those assets;
• the trust’s family history and source of funds justify a different outcome; or
• contributions made by previous generations should be heavily recognised.

For practitioners, this shifts some arguments from the “property” stage to the “contributions and adjustment” stage.

Increased importance of trust drafting and governance

Families and advisers may reconsider trust structures, particularly where:

• a single family member holds broad appointor powers;
• one person can readily replace trustees;
• control passes automatically to a beneficiary.

The more concentrated the control, the greater the risk that a court may characterise the trust as that person’s property.

As a result, wealth advisers, accountants and lawyers may seek to implement governance structures that genuinely diffuse control among multiple parties.

More litigation over “effective control”

Although the majority favoured a broad view of control, Justice Strum’s dissent highlights that the law remains fact-specific.

Future disputes are likely to focus on:

• whether powers are presently exercisable;
• whether additional steps are required before control can be obtained;
• the extent of fiduciary constraints; and
• whether practical control differs from legal control.

Accordingly, trust cases will continue to be heavily dependent on the wording of the trust deed and the surrounding factual circumstances.

Bottom line

For family lawyers and parties to property settlements, Caldwell reinforces that control is king.

If a spouse has the practical ability to assume control of a discretionary trust and benefit from it, the trust assets are more likely to be treated as that spouse’s property. However, the ultimate division of those assets remains a separate question, allowing courts to still take into account the trust’s origin, purpose and intergenerational nature when determining a just and equitable outcome.

NOTE: An application has been made for leave to appeal to the High Court.

Disclaimer

Please contact us if you require further advice surrounding your or your spouses’ expenditure, post separation.

This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.