Legal Hypothetical: Family Court asked to Bust the Trust

 

Family Court asked to Bust the Trust
AFTER 30 years of marriage, Daniel and Rachel separate and divorce.

They cannot agree on the division of their assets and Daniel commences property settlement proceedings in the Family Court.

The Court hears that Rachel has an interest in a testamentary trust by way of an inheritance from her father.

The assets of the trust are valued in excess of $3 million and Rachel and her sister are the trustees of the trust and the “primary beneficiaries”.

Daniel argues that Rachel is entitled to half of the assets of the trust and that for the purposes of the property settlement, $1.5 million should be assessed as being Rachel’s property.

The Court hears evidence that Rachel and her sister have already received substantial, equal distributions from the trust.

Rachel argues that although she is a trustee, the terms of her late father’s will create a discretionary trust whereby the beneficiaries can include her children, brothers and sisters, nieces and nephews and charities.

She says that she has no power to decide who receives distributions from the trust, as the decision requires unanimous agreement with her sister and accordingly, it is not “her money” but family trust money.

The Court concludes that Rachel’s interest in the trust cannot be characterised as “her property” and that it is not proper for it to be identified as an asset of the parties, for the purposes of the division of the matrimonial pool of assets.

The Court nonetheless decides that Rachel’s interest in the trust is a significant financial resource that is relevant to her future financial needs and after considering the contributions of the parties during the relationship, concludes that Daniel shall receive a 10% adjustment in his favour regarding the division of the matrimonial pool.

If YOU would like a particular issue addressed, please email Manny at [email protected] or call him on (02) 6648 7487.

 

By Manny WOOD, Solicitor.

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