There are two main types of trust: Discretionary Trust and Unit Trust. A Discretionary trust is commonly used in the family structure because of the nature of discretionary and flexibility.


A Family Discretionary Trust is created by a legal document called a “Trust Deed”. The Trust Deed:

– Outlines the purpose of the trust.

– Details the rights and obligations of the trustees and beneficiaries

– Contains the powers of the trustee

– Identifies various parties such as initial Beneficiaries, Trustees & Appointor.


There are four (4) important roles in the trust relationship, namely:

– The Settlor – The Settlor must be an independent person, who cannot be a trustee and cannot be a beneficiary of the trust, and their spouse and children cannot be beneficiaries. A Settlor must be unrelated to the Trust.

– The Appointor – The Appointor controls the trust, and can remove or replace the trustee. If the trustee does not follow the Appointor’s directions, the Appointor can simply remove the trustee and appoint another trustee. Some of the Trustee powers can only be exercised with the consent of the appointor. Effectively and practically, the Appointor will be a person controlling the Trust, that person will be the main player or investor in the whole transaction. The Appointor controls the Trust by controlling the Trustee appointment and removal. An Appointor can also be a beneficiary of the Trust.

– The Beneficiaries – A beneficiary is a person for whose benefit the trustee holds trust property. In most trust deeds “initial beneficiaries” are noted in a schedule and are usually family members or other close relatives.

– The Trustee – The Trustee is appointed by the Appointor with powers contained in the trust deed and the Trustee Act 1958. Such power may be quite wide and extensive. The Trustee owes a duty of care of “good faith” to the beneficiaries, and the deed requires that all trustee(s), at all times, act in the best interests of all beneficiaries. A trustee can also be a beneficiary of the Trust.


One of the many reasons to set up a Family Trust is to protecting against relationship property claims. Since the trust asset is legally held by the trustee on behalf of the beneficiaries, the asset is protected from relationship claim or divorce proceeding should such a relationship turns bad or sour.


However, for the purpose of the Family Law Act 1975 the term “property” has a very broad definition. There is a situation where neither the husband nor wife is a beneficiary of the Trust, the assets of the trust can be available for the “matrimonial property pool” based on factors such as the assets having been built up by the contributions of the parties over a long period.


Family Assets

All the property owned by you and your partner, either in your joint names or in your individual names, is known as the “matrimonial asset pool”. In general, there is no differentiation between the assets that whether they are prior acquired or acquired after the marriage. All assets and liabilities that are owned or owed by either party prior to the marriage, accumulated during the marriage, and acquired or incurred post-separation, would be included in the matrimonial asset pool.


There is no presumption that assets are divided equally or in any other way in the event of the division of property between a husband and wife, or de facto partners, when they separate. The guiding principle of property division by the court is “just and equitable”.


Generally, the Family Court takes a four-step process for working out what percentage of the property each of the party should get:


1. Working out the matrimonial asset pool.

2. Assessing and allowing for the contributions, including both financial and non-financial, from each party to the asset pool.

3. After assessing your respective contributions, the court would then determine whether there ought to be a loading in either parties favour to reflect ‘needs’.

4. Ensures that the outcome of the previous three steps are ‘just and equitable’, or fair and reasonable in all the circumstances.


In a situation where the asset is held by the trust, the court will also examine the influence and control over the trust by the party to determine whether the asset should be included in the matrimonial asset pool.


The hallmark case is the 2008 High Court decision of Kennon v Spry. In the case, the husband amended the trust deed, in particular, after their relationship turns bad, to remove both him and his wife as beneficiaries. The court eventually decided the trust can be included in the asset pool of separating parties. The court held that the test here is one of control. The case indicates the court will look at the extent to which the parties of the relationship had control of the trust and examine how the trust operates to decide whether the trust to be included in the asset pool.



(1) If you desire a family trust that has protection against relationship property claims, you must act earlier rather than wait until the relationship turns sour.  It usually too late once you believe that you may need to set up a trust or an amendment of the existing trust to protect your interest.


(2) You must seriously consider the structure of the trust and obtain legal advice when setting up a family trust.


(3) Every single family has a different financial situation and purposes of setting up a family trust, and there is no universal template that can fit your specific needs. You should obtain advice from lawyer, accountant or other relevant advisors before you take action.


For more information, please contact our office.