Trust capital can be accessed for spousal maintenance

A recent judgment in spousal maintenance proceedings in the Family Court, in which trust capital was accessed to meet the husband’s obligations to pay spousal maintenance, reaffirms that the powers of the Family Court are far reaching.

Spousal maintenance is a sum of money paid periodically or in a lump sum by one spouse to another for living expenses. It is different from child support payments, which are designed to help cover the living expenses of children. The Family Law Act allows a spouse to make an application for their own maintenance provided they can demonstrate a need and the other party’s capacity to pay.

But what happens when it appears neither party has the income capacity to pay spousal maintenance and the only money available is the capital of a trust?

The answer, supported by the recent case of Noble [2014] FCCA 42, is that the capital of a trust controlled by one party is not “sancrosanct” and can be used to meet a spousal maintenance order. This can apply even if the other party is drawing an income from the trust.

In the March 2014 case, the wife made an application for interim spousal maintenance from the husband while the final property application was still pending before the Court. The wife worked part-time and the couple had two children who spent most of their time living with the wife. The wife earned, by way of wages, social security, rent assistance and child support, a gross income of $888 per week. The wife claimed her weekly expenses were $1,096 per week. The husband claimed to only have a spare $11 per week over and above his recurrent weekly expenditure, which included the child support he was already paying to the wife.

The judge considered it “highly relevant that Mr Noble controls a trust with assets of around $1 million in value. As such, his financial resources must be considered to be grossly disproportionate to those of Ms Noble … The imbalance in capital resources of the parties is a relevant consideration in determining whether it is proper that an award of spousal maintenance be made, particularly for a defined period of time pending a final hearing. In all these circumstances, I consider that it is reasonable that Mr Noble provides a recurrent form of maintenance to Ms Noble for her personal support”.

The husband’s evidence was that the only means by which spousal maintenance could be paid was from the capital resources of the Trust. The Court found there was no difficulty for the husband in accessing those funds and ordered that the husband pay the wife interim spousal maintenance of $200 per week.

Streeterlaw Family Law Specialist Simone Green said this right to access the capital of a trust for spousal maintenance is unique to Family Law.

“The Family Courts are a ‘super jurisdiction’, which can interfere in the rights of third party entities,” she explained. “When it comes to issues of spousal maintenance, it is important to obtain advice from a specialist family lawyer as the law in this area can be complicated.”

For more information or to talk with a Family Law expert, please contact Streeterlaw on 8197 0105 or email advice@streeterlaw.com.au.