The Federal Circuit and Family Court of Australia (‘the FCFCOA’) has a wide power to assess how to consider the existence of assets or revenue streams when making orders for a property division between a couple who have split up. This includes ‘piercing the corporate veil’ (looking through company structures to who really exercises control) and treating Trust assets in a similar way.
Often people have set up structures in conjunction with their accountants to allow them to manage income flows and minimize their taxation obligations, or protect their personal assts from claims if their business arrangements leave them exposed to a significant claim. People also set up arrangements to allow assets to pass between generations while taking advantage of some tax exemptions, or to ensure that control of a valuable asset remains well managed even when the original owner is long deceased (such as through a testamentary trust)
But when it comes to a family law settlement, the FCFCOA has a different approach, that is centred around a ‘nexus of control’ or reasonable expectations of continuing arrangements. That is, it’s all very well for whatever structure you have to comply neatly with taxation provisions, but if you are really the one in control, that asset is yours as far as family law is concerned, and will form part of the assets available for division. You may be just one of the directors of a company that is the trustee of a trust, but if day to day you are the only one making decisions and everyone follows your lead without question, then really you have control, and as a result, assets managed under trust could be drawn into your family law dispute.
If you have an income coming to you through a testamentary trust, or just incomes streamed to you as a grandchild from a valuable family asset, if that income is predictable, ongoing and historically consistent, then the FCFCOA may well see that as a significant resources, lowering your ‘future need’ when dividing up the rest of your assets.
In short, the cleverest structures you or your accountant can imagine could be like gossamer in the wind to a Judge of the FCFCOA.
Maybe more money does lead to more problems. Contact our team of family lawyers on 03 9614 7111 or email melbourne@nevettford.com.au to discuss your personal circumstances and receive tailored legal guidance.
