Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 18 June 2016.
John and Jane married in 2001, had two children together and separated in 2013.
Jane commenced proceedings in the Family Court, and shortly thereafter an “interim” order was made that John pay spousal maintenance to Jane in the sum of $10,000 per month, pending the outcome of the final hearing.
In the lead up to the hearing, John discovers, by way of subpoena, that when Jane’s father died, his will established a testamentary trust of which Jane and her three brothers were beneficiaries.
The terms of the will, were such that Jane was not entitled to a specific sum of money and that payments were only to be made at the discretion of the trustees. The will did however contain a “wish” that Jane receive an annual payment of $150,000 and if Jane and John were to divorce, that she was entitled to a multi-million dollar lump-sum payment from the trust fund.
On this basis, John filed an application that the spousal maintenance order should cease. The Family Court dismissed John’s application, but on appeal, the Full Court found that Jane was “now able to support herself adequately”, stating that if she had requested payment from the trust fund, the funds would have been made available to her.
The matter went on appeal to the High Court and John successfully argued that although Jane’s interest in the trust fund was not an “asset” that Jane had an instant entitlement to, the court should view the trust fund as a “financial resource” and on that basis, find that Jane would always be able to “adequately support herself”.
This hypothetical serves as a reminder that attempts to protect assets from a potential family law claim by establishing family or testamentary discretionary trusts, is often pointless as the courts have the ability to take them into consideration as a financial resource, despite the fact that they may not technically be the assets of a particular party.
