Section 182 and Trusts: What Happens After Divorce
If you’re separating and a trust is involved, you may have heard someone say: “The trust can’t be touched”. That isn’t always true.
One of the most important tools in trust disputes after separation is section 182 of the Family Proceedings Act. In the right circumstances, it allows the Court to step in and make changes to trust outcomes after a marriage ends.
This article explains:
- what section 182 is,
- when it can apply,
- what the Court actually does, and
- why timing and expectations matter.
What is section 182 of the Family Proceedings Act?
Section 182 gives the Court power to review and adjust certain trust or property arrangements connected to a marriage, once that marriage has ended.
It is designed to deal with situations where:
- a trust was set up or used during a marriage; and
- the end of the marriage creates a result that is significantly different from what was expected.
Importantly, section 182 is not about punishing anyone or automatically dividing trust assets. It is about what the law says is fair, in light of what the marriage created and what is lost when it ends.
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When can section 182 apply?
Section 182 has some clear limits. It only applies if all of the following are met:
- You were married
(Section 182 does not apply to de facto relationships.) - The marriage has formally ended
This means a divorce has been granted. - The application is made within a reasonable time after the divorce
Waiting too long can matter. - There is a nuptial settlement
If any one of these elements is missing, section 182 won’t apply… even if the situation feels unfair.
What is a “nuptial settlement”?
A nuptial settlement is an arrangement made in connection with a marriage that sets out how property is to be held or used for the benefit of one or both spouses.
In trust cases, this often involves a family trust.
Straightforward examples
It is usually clear that there is a nuptial settlement where:
- a trust is settled during the marriage; and
- one or both spouses are beneficiaries of that trust.
More complex situations
Things become more complicated when:
- the trust was set up before the marriage; or
- property was transferred into the trust during the relationship; or
- the trust deed was amended while the couple was together.
In some cases, those later changes are enough for the Court to say the trust forms part of a nuptial settlement — even if the trust itself existed earlier.
This is one of the reasons section 182 cases are so fact-specific.
What does the Court actually do under section 182?
A common misconception is that section 182 allows the Court to simply split trust assets 50/50.
That is not how it works.
Instead, the Court compares two scenarios:
- What each spouse would likely have received from the trust if the marriage had continued; and
- What each spouse actually receives now that the marriage has ended.
If there is a significant disparity between those two positions, the Court may step in to address the loss.
The focus is on expectations created by the marriage, and how those expectations were changed by its end.
What orders can the Court make?
If the Court decides section 182 applies, it has flexibility in the orders it can make. These may include:
- ordering a payment of money;
- requiring the transfer of specific property; or
- making an adjustment to trust interests.
The outcome will depend on what is needed to fairly reflect what has been lost — not on an automatic formula.
A real example: Preston v Preston
The Supreme Court decision in Preston v Preston is a clear example of how section 182 can work in practice.
In that case:
- the marriage lasted less than five years; and
- the husband had settled most of the trust assets before the relationship; and
- during the marriage, the husband added his wife as a discretionary trustee (although not by name).
The couple and the trustees took the dispute all the way to the Supreme Court, who ordered the trust to compensate the wife $243,000, representing about 15% of the trust’s equity, allowing her to be mortgage-free.
The decision shows that:
- section 182 can apply even to long-standing trusts;
- the length of the marriage is relevant, but not decisive; and
- the Court will look closely at what the marriage created in terms of expectations and benefit.
The Clean Break approach
At Clean Break, we understand that dealing with trust property after separation is not just a complicated legal puzzle. How this is resolved will significantly impact your financial situation in the future.
We focus on:
- explaining the law in language you can actually understand;
- identifying realistic options (not false promises); and
- choosing the right legal pathway for your situation.
Our approach is grounded in our three core values:
Help, never hurt
We aim for solutions that protect you without escalating conflict unnecessarily.
Excel and improve
Trust law is complex and constantly evolving. We stay sharp so you don’t have to.
Find the joy
Even in separation, clarity and fairness can create space for a better future.
Final thoughts
Section 182 recognises that marriages often create shared expectations and shared benefit, even where assets sit inside trust structures.
If you were married and a trust formed part of your relationship, section 182 may be one of the pathways worth getting legal advice on. Early advice matters, because timing and detail can make a real difference.
If you’d like to talk about how section 182 might apply to you and your trust, our team is here to help.
Not able to travel to our office? We are happy to meet you online.
Read more articles about Trusts and Separation