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Cracking Complex Property Pools: Trusts
What Clients Need to Know When Trusts Are Part of a Property Settlement
Trusts are one of the most confusing parts of a family law property settlement. Many families use trusts to hold assets, run businesses, protect wealth, or manage income and when separation happens, it’s not always clear who “owns” what or how a trust should be divided.
At ALA Law, we specialise in helping clients navigate these structures so that your settlement is fair, transparent and legally secure. Here’s a simple guide to help you understand how trusts work in family law.
1. What Is a Trust, and Why Does It Matter in a Separation?
A trust is a legal structure that holds assets for the benefit of others.
It can hold things like:
- property
- investments
- business assets
- cash
- shares
- loans
- intellectual property
But unlike other assets, you don’t always “own” the things in a trust, it depends on how the trust is set up and who controls it. That is why trusts can be tricky in a separation.
2. Different Types of Trusts Explained Simply
Not all trusts are the same. Here are the most common ones you might come across:
Family / Discretionary Trust
- The trustee decides which family members receive money or assets.
- There are no fixed ownership shares.
Unit Trust
- People hold “units”, similar to shares.
- Your entitlement usually depends on how many units you own.
Hybrid Trust
- A mix of a family trust and a unit trust.
- Some parts are fixed, and some are discretionary — making them more complex.
Bare Trust
- The trustee holds an asset for one person who has full control.
- Often used for children or certain SMSF arrangements.
Testamentary Trust
- Created under a Will.
- Common for inheritance and wealth protection.
Understanding the type of trust is the first step in deciding whether the trust forms part of the asset pool, a financial resource, or something in between.
3. Who Controls the Trust? (This Is More Important Than You Think)
Control is one of the biggest questions in family law.
Key roles include:
- Trustee – manages the trust
- Appointor – can remove or replace the trustee
- Directors/Shareholders – if the trustee is a company
- Beneficiaries – people who may receive money or assets
In many cases, the person who controls the trust has the real power and benefit — even if the trust says the assets don’t belong to them personally.
This is why we closely examine who has decision-making power and who has historically received distributions from the trust.
How Trust Income and Distributions Affect Your Settlement
- Trusts are often used to distribute income to family members in a tax-effective way.
- In a separation, this can become highly relevant.
Distributions may be treated as:
- part of the overall property pool
- a financial resource
- evidence of control or influence
Even if you didn’t legally “own” the trust assets, the Court may still consider trust income or benefits when working out a fair settlement.
Warning signs we look for:
- unusually large distributions just before separation
- loans that look like disguised payments
- trust money used to pay personal expenses
- complex “loan-back” arrangements
- business profits retained inside the trust
Our job is to unpack all of this and ensure the financial picture is clear.
Why Trusts Make Property Settlements More Complex
To understand a trust properly, we often need to review:
- the trust deed
- financial statements
- tax returns
- distribution minutes
- loan accounts
- company records
- any deeds of variation
This isn’t to overwhelm you — it’s simply the level of detail needed to ensure the settlement is fair and legally enforceable.
6. How Trust Assets Are Dealt With in Your Property Settlement
How we deal with trust assets depends on the structure.
If the trust itself needs to be changed, we may need to:
- change the trustee
- update company directors
- adjust unit or share holdings
- change appointor powers
- transfer property out of the trust
- prepare new deeds or resolutions
If trust assets need to be transferred, we ensure:
- the correct party is authorised to make the transfer
- transfers are recognised legally
- tax and stamp duty issues are managed
- all documentation is properly completed
If trust income is relevant, we may:
- make adjustments so one party receives compensation
- account for financial benefits already received
- offset trust advantages against other assets
Every trust structure is unique — so every solution must be tailored.
7. Why You Need Specialist Help With Trusts in Family Law
Mistakes with trust structures can result in:
❌ unenforceable orders
❌ tax complications
❌ breaches of company/trust law
❌ future litigation to fix defective agreements
Our role is to ensure your settlement:
✔ properly identifies how the trust works
✔ values trust interests correctly
✔ accounts for control, income and benefits
✔ is drafted in a way that binds the right parties
✔ avoids tax traps and compliance issues
✔ results in a final order that is enforceable and respected
Final Word
Trusts can be incredibly valuable but also incredibly complex. If a trust is part of your property pool, you need advice that goes far beyond a basic valuation.
At ALA Law, we specialise in unpacking complicated ownership structures to make sure your financial settlement is fair, clear and fully compliant.
If you’re separating and a trust is involved — whether it’s a family trust, business trust, SMSF structure or inherited trust — we are here to guide you through every step with clarity and confidence.