Discretionary trusts in family law after Woodcock
Updated October 2026.
Family trusts have long been used to hold wealth outside the names of the people who benefit from them. For many years, that meant a discretionary beneficiary’s interest was usually treated in family law as a “financial resource” rather than property that could be divided. Two decisions have steadily eroded that assumption: the High Court’s decision in Kennon v Spry in 2008, and the Woodcock decisions in 2021 and 2022.
Property or financial resource: why it matters
In a property settlement, the court divides the parties’ property. A financial resource, such as an expectation of distributions from a family trust, is not divided, but it can affect how the rest of the pool is shared. Whether a trust interest is property or a financial resource can therefore change the outcome substantially. Read more about property settlement and business interests.
Kennon v Spry (2008): control matters
In Kennon v Spry [2008] HCA 56, the husband was the trustee of a family discretionary trust and had taken steps to exclude himself and his wife as beneficiaries. The High Court held that the trust’s assets could still be treated as property available for division. Where a party has control of a trust, for example as trustee with the power to distribute to themselves or their spouse, the court can look past the trust structure.
After Kennon v Spry, many advisers focused on control. A beneficiary who was not a trustee or appointor, and had no fixed entitlement to income or capital, was generally treated as having only a financial resource.
The Woodcock decisions (2021 and 2022)
The Woodcock litigation in the Federal Circuit and Family Court of Australia tested that assumption. The husband was one of several directors of the corporate trustees of a group of family trusts and one of the primary beneficiaries, but he had no fixed right to income or capital and argued that his interests were at most a financial resource.
| Decision | What the court decided |
|---|---|
| Woodcock & Woodcock [2021] FedCFamC1F 88 | The wife’s subpoenas for the trust documents, which had been set aside, were reinstated. The court found the trust deeds and records were relevant to the husband’s entitlements. |
| Woodcock (No 2) [2022] FedCFamC1F 173 | On a preliminary question, the court held that a discretionary beneficiary’s rights to due consideration and due administration of the trust are property under the Family Law Act and are capable of valuation. How they should be valued was left for the final hearing. |
Both were decisions of a single judge at first instance, not appeals. But they signal that a beneficiary’s interest in a discretionary trust can be property in its own right, even without control of the trust.
What this means
- Trusts are not a guaranteed shield. A discretionary trust interest may be brought into the property pool, not just treated as a financial resource.
- Trust documents can be obtained. Courts are willing to order production of trust deeds, financial statements, and distribution records.
- Every trust is different. The trust deed, who controls it, the history of distributions, the party’s influence, and the interests of other beneficiaries all affect the outcome.
- The law is still developing. There is real uncertainty about when bare beneficiary rights are property and how to value them. Advice should be based on the current state of the law and the specific trust.
- Planning ahead helps. A Binding Financial Agreement is the most reliable way to set out how trust interests will be treated if a relationship ends.
Frequently asked questions
Can a family trust be divided in a divorce?
It can be. If a party controls the trust, its assets may be treated as that party’s property. Even without control, a beneficiary’s rights may be property capable of valuation following Woodcock (No 2). In other cases, the interest is treated as a financial resource that affects how the remaining property is divided.
What is the difference between property and a financial resource?
Property is divided between the parties in a property settlement. A financial resource, such as an expected stream of trust distributions, is not divided; instead, the court considers it when determining each party’s share of the property.
Does a trust protect my inheritance or family wealth?
Not reliably. A trust may help, but courts can look past trust structures where a party has control, and a beneficiary’s rights may themselves be property. A Binding Financial Agreement gives more certainty.
Can my former partner get copies of trust documents?
Often, yes. In Woodcock, the court allowed subpoenas for trust deeds and records because they were relevant to the husband’s entitlements. Each party also has a duty to disclose their interests in trusts.
Talk to us
If you are a trust beneficiary or controller and are separating, or planning a relationship, we can advise on how your interests are likely to be treated. Call 02 9283 5599 or use the form below. Accountants and financial advisers can also see our page for professional advisers.
