Section 182 - a possible trust busting tool

Relationships (Family)

When going through a separation, trusts have often been viewed as "safe" bets to protect assets from being divided. However section 182 of the Family Proceedings Act gives the court significantly greater power to deal with property owned by a trust.

These days many couples operate assets under a trust. Often a couple's major asset, their house, will not be owned by them but owned by a family trust. Sometimes the majority of assets are owned by a trust or trusts rather than owned by the couple.

When a couple separate and come to divide their property the court has some ability to deal with trusts under the Property (Relationships) Act but it is often a very limited ability to interfere with trusts which in many cases continue to operate under trust law regardless of the couple's separation.

Sometimes trusts are under the control of one party rather than both and the other party may have a limited ability to realise assets from that trust.

Where a couple were married (it does not apply to de facto relationships) there is a provision under section 182 of the Family Proceedings Act which gives the court significantly greater power to deal with property owned by a trust.

Its powers include the ability to divide the property owned by the trust and settle it on individual trusts, one under the control of one party and one under the control of another. Although it won't usually be the case, section 182 has even been held to apply to a trust that was set up by one of the parties parents rather than the couple themselves.

Section 182 is an important consideration to take into account where a married couple separate and a trust exists over which one party has no control. But it is also important to consider when entering into a relationship property agreement to make sure that agreement prevents S182 applying to any trusts and trust property. Overall it is important that any contracting out agreement deals not only with assets owned individually or jointly by the couple but also owned by other entities such as a trust or company.

For more information on separation involving trusts or any other family related issues, please contact one of the members of our expert Relationships Team.

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