Asset Protection and the Family Court

The Family Court possesses extensive powers to deal with the property and financial resources of parties to a marriage. The recent case of Kennon v Spry, decided by the High Court earlier this year, shows just how extensive. The case dealt, in the main, with the meaning of ‘property’ for purposes of the Family Law Act and, in particular, what property there may be in certain aspects of a discretionary trust. Five judges handed down four separately reasoned decisions, with only one of those judges adopting what, until then, would have been the standard analysis of trusts and property.

The husband, Dr Spry, was and is a learned senior barrister and lecturer with a specialty in the law of trusts. His Equitable Remedies has, for many years, been the standard text, rivalled only by Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies. The eponymous Gummow is, for the time being, the dominant personality on the High Court. Dr Spry had established a trust early in life and, for all intents and purposes, neither he nor his wife could be said to have any interest in the trust which could be said to amount to property. Three of the five judges, including Justice Gummow, found otherwise. And, whilst the Gummow–Spry rivalry did not move from academia to the Court, the fallout has indicated that Dr Spry was less than impressed with the majority judgments. (It is, depending on your perspective, a great story, a tragedy, or both.)

Whilst there are many grounds upon which the majority’s reasoning can be (and has been) criticised, the thing is that the High Court is, as the final court of appeal, by definition always right. The decision needs to be absorbed. The lessons which everyone but Dr Spry can draw from the decision are these—

  • Nothing is certain in the law.
  • Prepare your estate plan early in life. This should be done as soon as possible, and certainly well before you are married.
  • Be clear about the goals of your estate plan. In particular, is the family trust in your estate plan for your benefit, or the benefit of future generations? If it is for future generations, then neither you nor your spouse should be a potential beneficiary.
  • Consider having a binding financial agreement either prior to marriage or during marriage as part of your estate plan.
  • Don’t get divorced.

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