Trust Control and Separation: When Powers Matter
When a relationship ends and a trust is involved, it can feel as though one person holds all the cards.
Often, that feeling comes down to control rather than ownership.
If one partner controls the trust — who the trustees are, who benefits, and how decisions are made — that control can shape what life looks like after separation. In some rare situations, the law recognises that control as something that needs to be addressed.
This article explains when trust powers matter, and when they don’t.
What are trust powers?
A trust deed does more than say who the beneficiaries are. It also sets out who has the power to make decisions about the trust.
Those powers can include:
- appointing or removing trustees;
- deciding who receives income or capital;
- adding or removing beneficiaries; or
- controlling how trust assets are managed.
These powers are often held by a trustee, an appointor (typically the person who settled the trust), or both. Even if someone does not legally own the property held in a trust, holding the key powers of a trust can give them real practical control over how the trust operates and who benefits from it.
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Why trust powers matter at separation
If one partner holds all the meaningful powers under a trust, they may be able to:
- continue living in a trust-owned home;
- control distributions to themselves;
- exclude the other partner from any benefit.
Where a trust was closely tied to the relationship, this can create a significant imbalance after separation.
For a time, lawyers argued that a “bundle of rights” under a trust could be treated as relationship property and valued for separation purposes. That argument lost traction for a while, then was given new life by the Supreme Court in a case called Clayton v Clayton, before recently becoming more limited again.
The starting point: Clayton v Clayton
In Clayton, the Supreme Court considered whether certain rights and powers under a family trust could be treated as “property” for relationship property purposes.
The trust deed in that case was highly unusual. Mr Clayton had powers that allowed him to:
- act as the sole trustee;
- remove all other beneficiaries and appoint himself as the sole beneficiary; and
- distribute the trust assets to himself,
all without breaching the terms of the trust or his fiduciary duties, because those duties had effectively been modified.
The Court found that Mr Clayton’s powers gave him control over the trust assets that was tantamount to ownership. Because of that, his powers were property, and because they were acquired during the relationship, they were relationship property.
The value of those powers was assessed by reference to the net value of the trust assets.
At the time, Clayton was seen as a potential breakthrough case. But the Supreme Court itself made it clear that the decision might be confined to its particular facts.
Why Clayton is the exception, not the rule
Most trust deeds do not look like the one in Clayton.
Since that decision, the Courts have repeatedly emphasised that whether trust powers are property depends almost entirely on:
- the wording of the trust deed; and
- how constrained those powers really are.
Two later cases illustrate how carefully the Courts draw the line.
When trust powers are not relationship property: Cooper v Pinney
In Cooper v Pinney, the Supreme Court considered a situation where the trust powers were far more limited than those in Clayton.
Mr Pinney was one of several beneficiaries of a family trust and held the power to appoint and remove trustees. However:
- the trust required at least two trustees;
- trustees had to act unanimously; and
- Mr Pinney’s fiduciary duties were intact and unmodified.
Although he had influence, he could not use his powers to take sole control of the trust or its assets without breaching his obligations.
The Supreme Court held that these powers were not tantamount to ownership. As a result, they were not property, and not relationship property.
The Court said the powers reserved to Mr Pinney were significantly different from those held by Mr Clayton, and that difference mattered.
Trust deeds really matter: Goldie v Campbell
Goldie v Campbell provides another example of how closely Courts analyse trust deeds.
In that case, a de facto partner argued that the trust powers resembled those in Clayton. The Court rejected that argument after examining the trust deed in detail.
Key factors included:
- a long-standing intention that the trust benefit named children;
- a clause preventing self-benefit;
- requirements that trustees could not act alone; and
- limits on removing existing beneficiaries.
The Court concluded that, taken together, these features meant the powers did not amount to ownership or control of the trust assets.
A note on sole trustees and proper purpose: Legler v Formannoij
More recently, the Supreme Court considered trust control in Legler v Formannoij. That case focused on whether appointing a sole corporate trustee breached the proper purpose rule.
The majority of the Court found that, on the evidence, the appointment was not made for an improper purpose. However, the case highlights how sensitive Courts are to:
- independence in trust decision-making; and
- whether powers are exercised for the right reasons.
It is important to remember that trust control issues are not just about relationship property law, but also about core trust principles.
What this means in practice
The Courts have now clearly signalled that Clayton sits at the outer edge of what is possible.
Trust powers may be treated as property only where they are:
- unusually broad;
- largely unconstrained; and
- capable of being exercised for personal benefit in a way that looks like ownership.
In most cases, trust powers will not meet that threshold.
That said, understanding who holds control — and how that control operates in reality — remains an important part of analysing any trust situation at separation.
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
Trust powers can matter at separation, but only in limited and specific circumstances.
Whether those powers amount to relationship property depends on the detail of the trust deed and how the trust actually operates. This is not an area for assumptions or shortcuts.
If trusts — and trust control — are part of your separation, early specialist advice can help you understand what is realistically on the table, and what is not.
If you would like to talk about how trust powers might affect your situation, our team is here to help.
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