Family Trusts, Control, and s 79: When “Generational Wealth” Still Becomes Property of the Husband

In Caldwell & Caldwell [2026] FedCFamC1A 81, the Full Court allowed the wife’s appeal and declared that three family trusts — the B Trust, C Trust and D Trust, and/or their assets — were property of the husband for the purposes of s 79 of the Family Law Act 1975 (Cth). The decision is significant because the majority held that the primary judge wrongly mixed up two separate questions: first, whether the trusts were property of a party to the marriage; and second, whether it would later be just and equitable to adjust those trust assets in favour of the wife. Those are not the same question.

🧩 Facts and Issues

Facts:

The husband’s father established three family trusts connected with a long-running family business. The husband and the parties’ two adult sons became co-appointors/principals after the father’s death. The husband also held preferential voting rights in the trustee companies and had the ability to remove the sons as co-appointors or principals.

The wife sought a preliminary declaration that the trusts and/or their assets were property of the parties or either of them for the purposes of s 79. The primary judge refused that declaration, holding that the trusts were not property because, among other things, they were established as intergenerational family business structures, the wife was an excluded beneficiary, the trust assets were not built up by the parties’ marital contributions, and the husband had not actually exercised control over the trusts.

On appeal, the majority held that this approach was wrong. The husband had effective control and the capacity to benefit himself. That was sufficient to characterise the trusts and/or their assets as his property for s 79 purposes, even though the later question of whether the wife should actually receive any adjustment from those assets remained separate.

Issues:

1. Were the trusts and/or their assets property of the husband for the purposes of s 79?
2. Did the primary judge wrongly treat matters relevant to adjustment and contribution as if they determined the threshold question of property classification?
3. Did the husband’s control need to be actually exercised, or was his present capacity to control enough?
4. Did the proper purpose rule or the wife’s status as an excluded beneficiary prevent the trusts being characterised as the husband’s property?
5. What role did the dissent play in exposing the difficulty of this area of law?

⚖️ Applicable Law – Legislation, Regulations, Rules

Family Law Act 1975 (Cth)

• s 79 — power to alter property interests of the parties to the marriage or either of them.
• s 4 — definition of property, relevant to the broad family law meaning of property.

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)

• rr 10.10–10.11 — separate decision / preliminary issue procedure. The primary judge had determined a separate issue: whether the trusts were property for s 79 purposes.

📌 Precedents Relied On

Key authorities included:

• Kennon v Spry (2008) 238 CLR 366 — leading High Court authority on discretionary trusts and property under s 79.
• Stanford v Stanford (2012) 247 CLR 108 — need to identify existing legal and equitable interests before considering whether alteration is just and equitable.
• Stephens & Stephens (2007) FLC 93-336 — control of a trust and capacity to benefit can support trust assets being treated as property.
• Harris & Dewell (2018) FLC 93-839 — control alone is not enough; the relevant party must control an entity/person capable of obtaining or effecting a beneficial interest.
• Baba v Sheehan (2021) 151 ACSR 462 — proper purpose rule and powers of appointment.
• Byrnes v Kendle (2011) 243 CLR 253 — trust construction principles.
• Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 — third-party interests and limits on Family Court powers.
• Barrett & Winnie (2022) FLC 94-093 — trust assets not automatically property merely because of some connection with a spouse.

🧠 Analysis

Issue

Were the three family trusts and/or their assets properly characterised as property of the husband for the purposes of s 79, given the husband’s powers of control, his capacity to benefit himself, and the fact that the trusts were created by his father as part of a wider intergenerational family business structure?

Rule

The word “property” in s 79 is read broadly and purposively in family law. It is not limited to strict beneficial ownership in the ordinary trust-law sense. A discretionary trust may be treated as property of a spouse where, looking at the trust deed and surrounding circumstances, the spouse has effective control and the capacity to benefit himself or herself from the trust.

However, identifying trust property as property of a spouse does not automatically mean the other spouse receives an adjustment from those assets. Classification and adjustment are separate steps. First, the Court identifies whether the trust/assets are property. Only later does the Court decide whether, and how, those assets should be adjusted under s 79.

Application

1. The primary judge conflated classification with adjustment

The central error was that the primary judge asked the wrong question. The preliminary issue was only whether the trusts were property of the husband. It was not yet the time to decide whether the wife should receive a distribution or adjustment from those assets.

The majority held that the primary judge focused too heavily on matters such as:

• the family-business origin of the trusts;
• the trusts being created by the husband’s father;
• the wife being an excluded beneficiary;
• the possible impact on the adult sons; and
• whether it would be proper to force a distribution to the wife.

Those matters may be relevant later when assessing contributions, justice and equity, third-party interests, or the form of final orders. But they did not prevent the Court from first finding that the husband’s powers gave him property for s 79 purposes.

2. Effective control was enough — the husband did not need to pull the trigger

The husband argued that because he had not actually removed the sons as co-appointors or exercised full control, the trusts were not presently his property.

The majority rejected that. The key point was not whether the husband had already exercised the power, but whether he had the present ability to do so.

The Court found that:

• the husband had preferential voting rights;
• he could control the trustee companies;
• he could remove the sons as co-appointors/principals;
• he could appoint himself or a controlled entity; and
• the trust deeds did not prevent him from benefiting himself.

That gave the husband effective control. The Court did not require him to first “seize control” before the trusts could be classified as property.

3. The proper purpose rule did not defeat the property characterisation

The respondents relied heavily on the proper purpose rule, arguing that if the husband used his powers to benefit the wife, directly or indirectly, that would breach the purpose of the trusts.

The majority held that this argument again confused two different things. The question was not whether the husband could validly make a distribution to the wife. The question was whether the husband had present powers that meant the trusts were effectively his property for s 79 purposes.

Even if there were limits on conferring a benefit on the wife directly, the deeds allowed the husband to benefit himself. Once that was accepted, the husband’s control and capacity to benefit himself supported the conclusion that the trusts were property of the husband.

4. Origin of the trust assets goes more to contribution than classification

The primary judge relied on the fact that the trust assets came from the husband’s family business and were not built up by the parties’ marital efforts.

The majority accepted that generational wealth may sometimes be relevant, but held that in this case it did not answer the classification question. The origin of the assets is highly relevant to:

• contributions;
• whether any adjustment should be made;
• the percentage outcome;
• the protection of third-party interests; and
• whether orders should directly affect trust assets.

But origin alone did not prevent the trusts from being property where the husband had effective control and the ability to benefit himself.

5. The declaration did not mean the wife automatically gets trust assets

This is a crucial limitation. The majority expressly emphasised that declaring the trusts property of the husband does not mean the wife automatically receives any part of them.

The final trial judge still has to determine:

• the parties’ contributions;
• whether any adjustment is just and equitable;
• whether the trusts should be left intact;
• whether other assets outside the trusts are sufficient; and
• how to protect the interests of the adult sons and other beneficiaries.

So the appeal decided the threshold property question, not the final property division.

6. The dissent shows why this case matters

Strum J dissented. His Honour would have dismissed the appeal and agreed with the primary judge that the trusts were not property of the husband.

The dissent emphasised:

• the trusts were created by the husband’s father;
• they were part of a four-generation family business structure;
• the assets were not built up by the husband and wife;
• the husband had not historically treated the trusts as his alter ego;
• the wife was an excluded beneficiary; and
• the husband would need to take legal steps to assume control.

That disagreement highlights how difficult and fact-sensitive trust cases are. The majority, however, drew the line in favour of classification as property where the husband’s present powers gave him effective control and capacity to benefit himself.

Conclusion

The appeal was allowed. The Full Court set aside the primary judge’s order and declared that the B Trust, C Trust and D Trust and/or their assets are property of the husband for the purposes of s 79. Costs were reserved for further submissions.

⭐ Why This Case Is Significant

This is a major trust-property decision because it sharpens the distinction between:

1. Is the trust property of a spouse?
2. Should the trust assets actually be adjusted?

The majority makes clear that courts should not avoid classifying a trust as property merely because the trust has intergenerational origins, because third parties may be affected, or because the final adjustment may be difficult. Those are later-stage questions.

The decision also confirms that effective control can exist before control is exercised. A spouse cannot necessarily avoid s 79 by saying, “I have not yet used the power,” where the trust deed gives that spouse the present ability to control the trust and benefit himself.

This case is therefore likely to be cited in future high-value property disputes involving family trusts, succession structures, business trusts, and intergenerational wealth.

🧠 Take-Home Lesson

A family trust does not sit outside the matrimonial property pool simply because it is called “intergenerational” or because it was created by a parent. If a spouse has effective control and can benefit personally from the trust, the trust and/or its assets may be declared that spouse’s property under s 79.

But that is only step one. Whether the other spouse receives anything from that trust remains a separate question of contributions, fairness, third-party interests, and the final just and equitable outcome.