Family Trusts and Third Parties Under the Family Law Act 1975

This article examines the limitations on the powers of courts exercising jurisdiction under the Family Law Act to affect third parties who are entitled to be considered for distributions from a discretionary trust, or who exercise the responsibilities of trusteeship. These issues are explored in the light of the majority judgments in Kennon v. Spry. It is argued that in order for assets to be treated as property for the purposes of the Family Law Act, it is necessary, but not sufficient, that a party to the marriage has control of the assets and the power to distribute to himself, herself, or the other spouse. The source of the assets must also be examined. Where the source of the trust assets is from someone other than a party to the marriage, there are third party beneficiaries who have rights to be considered, and neither party to the marriage has an equitable proprietary interest in the fund, the trust property cannot be divided under s 79 or s 85A to the prejudice of third parties even where the conditions of control by a party to the marriage and power to distribute to one or other of them are met. Furthermore, the court cannot treat as property of the parties to the marriage or either of them, assets which are under the control of third party trustees unless a party to the marriage has an equitable proprietary interest, or has the power to appoint or remove the trustee