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Family Trusts, hiding assets, and their effect on your property settlement

Family Trusts, hiding assets, and their effect on your property settlement

A family trust can be a useful vehicle in a family as it allows you to manage your family assets in a way that offers you taxation advantages.

Trusts are often used to exclude property from a relationship and therefore division under Family Law. This article will examine how the Family Law Act 1975 and the Family Law Courts treats a trust when one spouse to a marriage or de-facto relationship is trying to exclude property by having it in a trust.

A trust is a relationship where one person holds property for the benefit of another. A trustee holds property on trust for the beneficiary. It is a well-established principle that regardless of a how a trust is set up, if a trust is just a sham or puppet of one of the spouses in a Family Law matter the trust will be disregarded, and the property will be available for distribution between the spouses.

However, if a Trust is discovered to have other beneficiaries or trustees that are proven to be part of an extended family the Court may still consider the property in the trust as a financial resource of one of the spouses. These “Financial resources” whilst not considered assets, still make a difference in the Courts assessment of your contributions and future needs.

The test between deciding whether the trust is a financial resource or asset of the relationship is whether one of the spouses controls the assets in that trust. If they have no control over the property in the trust the Court is less likely to consider the property in the Trust available for distribution between the spouses. The reason for this determination is that the Court is reluctant and limited in power to make orders that affect third parties.

Division of property within a Trust is a difficult and complex area of Family Law. If your circumstances involve a Trust you should seek family law legal advice from a specialist family lawyer. Call Amelia Cox on 4324 7699.