During your relationship, you might have mutually agreed to pay money into a separate account for your child’s schooling expenses. If neither party has accessed the funds in this account for personal use, it’s generally accepted that the account can be excluded from the property settlement. This is because the funds in the account are held “on trust” for the child.
This type of trust is usually not in writing. It is most often classified as an express trust and the result of a verbal conversation between you and your spouse or partner.
But what if you have put aside money for your child’s schooling and your spouse or partner doesn’t recall the conversation when it comes time to do the property settlement?
This issue was recently brought before the Federal Circuit Court of Australia in Tamaris & Tamaris  FCCA 3696.
The parties were married for 31 years, during which the husband managed the parties’ finances. The husband contended that the parties had a conversation to the effect that they would establish a separate account for their daughter’s tertiary schooling expenses in the country they resided in. The account was opened, called a “custody account” and money was regularly transferred to this account from joint funds. There was about $275,000.00 in the account at the time of the trial. He sought to exclude the funds from the property settlement based on the existence of a trust.
The wife did not recall the conversation and sought that the funds be added to the amount to be divided in the property settlement. She stated that the daughter ultimately undertook tertiary study in Australia, not the other country – so even if the conversation was had, it should be disregarded.
Formalities are often ignored in trusts involving family arrangements, making it more difficult to prove they exist. The Court will look at the evidence of both parties’ conduct to determine if there is, or it could be inferred that there was, a clear intention to create the trust. Where there is uncertainty, the trust will fail.
The Court found that there was a clear purpose of the alleged trust, being for the daughter’s school expenses in the other country.
The wife’s inability to recall the conversation was not evidence that the conversation did not take place – a fact which was admitted to by the wife. The Court found that it was more likely that the wife abandoned involvement in financial matters and was content for the husband to attend to the finances as he had done for the duration of the relationship. The Court was persuaded by the husband’s evidence that an express trust was created.
The daughter was the sole beneficiary of the trust property (being the funds for her schooling in the other country). Following the rule in previous cases, it was held that the daughter could put an end to the trust as she had reached 18 years of age and had completed her tertiary studies (albeit in Australia) – being the purpose of the trust monies. The monies were excluded from the property settlement.
Trusts can be complicated and, as seen in this case, are not always easy to determine. It’s important that you have an experienced family lawyer on your side. Alan Wright is an Accredited Specialist in Family Law and has been for over 20 years. He, alongside the rest of our family law team, will ensure that your assets and debts are properly factored into your settlement.