Bankruptcy and Family Law

There have recently been a number of Family Court (Full Court) decisions that, when combined with the recent legislative changes giving the Family Court jurisdiction over de-facto relationships, may diminish the effectiveness of traditional asset protection strategies against the breakdown of marriage and de-facto relationships. One of these cases found that a wife could make a claim against assets held in a trust controlled by the husband where those assets had been acquired and developed during the course of the marriage relationship, even though the trust was a discretionary trust and specifically provided that the wife would no longer be an object of the trust if she separated from the husband. Another case dealt with the proper division of property between a wife and a bankruptcy trustee where the bankrupt husband's debt to the Australian Taxation Office was more than all the matrimonial property in the asset pool. At first instance (the first case to deal with the 2005 Family Law Act and Bankruptcy Act amendments), the court divided the property half each. However, on appeal, the court found that the husband's actions in making incorrect income tax deductions (leading to the tax debt) had significantly increased the asset pool and therefore the wife had to share some of the burden of that debt. The matter is to be remitted for a new hearing. The interaction of a wide variety of laws leads to a complicated environment for effective asset protection. Ensure you get legal advice so you know where you stand in these types of matters.