How does power of appointment affect whether a trust is treated as property in a family law settlement?

How does power of appointment affect whether a trust is treated as property in a family law settlement?

In Queensland family law, the treatment of discretionary family trusts in a property settlement follows a two‑stage characterisation test:

1. Stage 1 – Is the trust property of a party?
   The court asks whether the party has effective control of the trust and the capacity to benefit from it.

   • Effective control is often demonstrated by holding the power of appointment – the right to remove or appoint trustees, or to direct the distribution of trust income or capital.
   • Capacity to benefit means the party can actually obtain a benefit from the trust (e.g., by directing distributions to themselves).

   If both elements are satisfied, the trust assets are characterised as property of that party and fall into the matrimonial property pool available for division. If either element is missing, the trust is treated merely as a financial resource (relevant only to future needs, not divisible as property).

2. Stage 2 – How should the property be adjusted in the overall settlement?
   Only after the trust is deemed property does the court consider the trust’s purpose, origin, the parties’ contributions, and future needs to determine whether any adjustment (e.g., a percentage share or lump‑sum) is required to achieve a just and equitable outcome.

Key authorities

• The Queensland Supreme Court in Di Trapani & another v Di Trapani & others [2026] QSC 20 confirmed that the power of appointment is a central factor in establishing control over a trust for family‑law purposes^[1].
• Staley v Hill Family Holdings Pty Ltd [2024] QSC 176 examined the appointor’s powers, including removal/appointment of trustees and variation of trust terms, and held that such powers can make trust assets available for division^[2].
• The Queensland Family Lawyers’ publication “Family Trust Control in Property Settlement” explains that the court looks at who truly holds the levers of control, with the power of appointment being a primary indicator^[3].
• Baker Love’s overview of how the Family Court treats trust assets emphasises the “control test” and the significance of the appointor’s authority^[4].
• Hamilton Locke commentary on the Staley decision notes that the appellate court clarified the appointor’s power of appointment and its direct impact on whether trust assets are part of the divisible pool^[5].

Practical takeaway

If you (or your spouse) hold the power of appointment over a discretionary family trust, you are likely to be found to have effective control. Combined with the ability to benefit from the trust, this will usually result in the trust assets being included in the property pool. Conversely, if you lack both the power to appoint/remove trustees and the capacity to obtain a benefit, the trust will generally be treated as a financial resource only.

See also

• What is a Property Pool and How Do Add‑Backs Work? – /faq/family/property-pool-and-addbacks/
• Two‑stage characterisation test for trust assets – /faq/family/two-stage-characterisation-test-trust-assets/
• Property settlement process guide – /blog/gold-coast-property-settlement-timeline/
• Family Law Practice Area – /practice-areas/family/