Whose Property Is It Anyway? How Caldwell Redefined the Reach of Family Law Into Generational Trusts

In the Australian agricultural and agribusiness sectors, discretionary trusts have long been regarded as a reliable mechanism for preserving generational wealth. The assumption has been straightforward: if the assets were built by previous generations, held in trust for lineal descendants, and never contributed to by a spouse, they should remain beyond the reach of a family law property settlement. However, the Caldwell & Caldwell decision handed down in May 2026 has disturbed that assumption in a manner that warrants serious attention.

The Caldwell & Caldwell Decision

In Caldwell & Caldwell [2026] FedCFamC1A 81, the Federal Circuit and Family Court (Division 1, Appellate Jurisdiction) declared that three discretionary trusts, being holding assets accumulated across four generations of a family business, were considered ‘property’ of the husband for the purposes of section 79 of the Family Law Act 1975 (Cth) (FLA). Not a single dollar in those trusts had been contributed by the husband or the wife during the marriage. The couple had already amassed personal wealth estimated between $16 million and $22 million outside the trusts. The trust deeds expressly excluded the wife as a beneficiary. None of it mattered.

The decisive factor was control.

The majority (Christie and Brasch JJ) held that because the husband was the first-named holder of the sole voting shares in each trustee company, he had ‘effective control’ of the trusts. That was sufficient to characterise the trusts as his property, in turn, overturning the primary judge’s ruling, who had found otherwise.

The implications for businesses in the agribusiness and agricultural industries are significant. The husband's father had established these trusts and had controlled them until his death. Shortly after the couple separated, the husband’s father had expressed a clear wish, via a codicil to his will, that the business remain within the family for future generations. The appellate court was unmoved by this. A codicil that post-dates the trust deeds cannot retrospectively define their purpose. The origin of trust assets, however many generations of sweat equity they represent, goes to the separate question of what adjustment a court might ultimately make, not to whether the assets are ‘property’ in the first instance.

Silver Lining

The majority emphasised that characterising trust assets as ‘property’ does not automatically mean a spouse will receive a share of them. The application of this decision remains a discretionary exercise, and factors such as the origin of the wealth and the interests of other beneficiaries will be relevant. Though, once trust assets cross the threshold into the property pool, the commercial leverage shifts. Settlement negotiations take on a very different complexion when a multi-generational trust is on the table rather than tucked safely behind it.

Shaping Legal Strategy

The decision's influence is already being felt. Just two weeks after Caldwell was handed down, Riethmuller J in Daeira & Diamanda [2026] FedCFamC1A 98 applied its authority for the proposition that the statutory definition of ‘property’ under the FLA extends beyond traditional legal and equitable proprietary interests. It was confirmed that combinations of rights and control over a discretionary trust are sufficient for trust-held assets to be treated as the property of a party to the marriage. In Daeira, that principle underpinned the Court's reasoning in upholding injunctions to preserve funds that had been traced from trust accounts controlled by a husband through family members to third parties.

The Conversations to Have Before It Is Too Late!

The practical imperative is clear. Any person involved in a family or discretionary trust, whether as appointor or director of a trustee company, should be asking investigative questions such as:

1. how is the control structured;
2. whether existing arrangements genuinely distribute power; and
3. whether a binding financial agreement might offer a layer of protection that a trust deed alone no longer can

In summary, the Caldwell decision demonstrates that legal structures established by earlier generations, even those created with considerable care and foresight, may no longer provide the level of protection originally intended.

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