In our earlier blog, published on 6 November 2025, we looked at the original decision of the Federal Circuit and Family Court of Australia (Division 1) (Trial Court) in the case of Caldwell & Caldwell [2025] FedCFamC1F 506, where the Trial Court found that three family discretionary trusts, built up over four generations of a family business, did not form part of the matrimonial property pool. To recap, the husband’s father had executed a Will, a First Codicil to that Will and had carefully structured the family trusts, so that, on his death, the appointor role would pass to the husband and his two sons together, with the husband alone holding the power to remove either son as a co-appointor, in an effort to keep the business within the family. At the time, the Trial Court accepted that this structure kept the trusts out of the matrimonial asset pool.
That decision has now been overturned on appeal. In the appeal decision, Caldwell & Caldwell [2026] FedCFamC1A 81 (Caldwell Appeal), the Full Court of the Federal Circuit and Family Court of Australia (Division 1) (Appellate Jurisdiction) (the Appeal Court) found that the very same discretionary family trusts should now be treated as the husband’s property for the purposes of section 79 of the Family Law Act 1975 (Commonwealth).
Caldwell Appeal – What Changed
Facts
The facts remained the same as stated in our earlier blog, namely:
- Three family trusts held a business built up over four generations;
- The husband, his father and (after his father’s death), his two adult sons, were joint appointors of the trusts;
- The husband and his two sons were required to exercise most appointor powers jointly and unanimously, but a specific clause in the trust deeds gave the husband the unilateral power to remove either or both of his sons as co-appointors, without needing to give a reason (in essence, he had a veto power);
- The husband’s father had made a Will and a First Codicil to that Will, expressing his wish that the business stay within the family and pass to the husband (his son) and the husband’s sons (his grandsons); and
- The husband had never actually exercised his power to remove his sons under the trust deeds for the trusts and had never received a distribution from the trusts.
The Appeal Court's Findings
The Appeal Court allowed the wife’s appeal by a 2:1 majority and declared the trusts to be the husband’s property. In reaching this decision, the majority relied on the following:
- Present ability to control is enough, even if unused: It didn’t matter that the husband had never exercised his power to remove his sons as co-appointors. Because he had the power to do so at any time, without requiring a reason, that was enough to say he had effective control of the trusts.
- A later Will and Codicil does not define an earlier trust’s purpose: The father’s Will and First Codicil to that Will, were made years after some of the discretionary family trusts were first established. The majority found that the father’s wishes, contained in his Will and Codicil, were statements that were incorporated ‘after the fact’ and which did not serve to explain the original purpose of those trusts.
- Trust purpose and beneficiary exclusions matter later, not at the first step: The trial judge in the original decision had treated the family’s succession planning objectives and the fact that the wife was excluded as a beneficiary of the trusts under a 2019 variation to the trust deeds, as reasons for establishing that the assets of the trusts weren’t property of the marriage.
The majority in the Appeal Court concluded that the family’s succession planning objectives and the wife’s exclusion as a beneficiary, are relevant in determining a secondary question, that being, whether it would be just and equitable to order a payment to the wife from the trust assets. It does not serve to determine the earlier, threshold question of whether the trust assets are to be included as property in the matrimonial pool.
One judge in the Appeal Court dissented, taking the view that the appeal should be dismissed and the original decision of the Trial Court, be upheld. In his view, the origin of the trust assets, the purpose of the trust and how it had been managed over the years, should carry just as much weight as who technically holds the power to assume control of the trust.
Key Takeaways
This decision changes some of the practical guidance we gave in our earlier blog:
- Asset protection may not be afforded where appointors hold unequal powers, even if they are nominally “joint” appointors. In this case, the husband alone could remove his co-appointors, while they had no equivalent power over him. Had the removal and replacement of appointors genuinely required unanimous agreement between all three appointors, with no one able to act alone, this issue would likely not have arisen. The Federal Circuit and Family Court of Australia will look at who can, in practice, take control, not just how appointors are appointed.
- Documenting your wishes at the time a trust is established matters more than documenting them clearly at a later date. A Will or First Codicil made well after a trust is set up may not be given much weight in explaining that trust’s original purpose. Ideally, a trust’s purpose should be recorded when the trust is created or updated at the time of any later variations, by way of the passing of a trustee’s resolution.
- Excluding a spouse as a beneficiary remains good practice, but it’s not a guaranteed shield. This is because the Appeal Court treated beneficiary exclusion as relevant to whether a payment should ultimately be ordered from the trust’s assets, not to the earlier threshold question of whether the trust counts as matrimonial property.
An Unsettled Area
The husband has since applied for special leave to appeal to the High Court of Australia, in respect of the decision of the Appeal Court. There’s no guarantee leave will be granted to him, so this may not be the final word. We’ll continue to follow this case and update this post if anything changes.
Need Help Protecting Your Trusts?
If your family has significant wealth tied up in a business, or you have set up trusts or a Will with succession to your bloodline in mind, this decision is a timely reminder to have your structures reviewed.
If you would like to chat more, feel free to contact our office on 03 9598 9489.