It depends – Can I safeguard our intergenerational family business from a family law claim?

In this edition of It depends, family partner Justine Woods discusses whether you can safeguard an intergenerational family business from a family law claim.

Video Transcript

Hello. Hello, everyone. I’m Justine Woods and I’m the family law partner at Cooper Grace Ward. And this is my little segment of, It depends. And it’s intended to tantalise you about what we’re going to be discussing in the family law component of the conference. And effectively that’s going to be, ‘can you assist your clients to safeguard their intergenerational business from a family law claim by a disgruntled in-law?’ And the answer is always, in the immortal words of our Scott Hay-Bartlem, it depends.

Can I safeguard our family business from a family law claim?

There are some recent cases that would suggest that if your structure has the hallmarks of sincerity, and I’ll come back to what I mean by that, and it’s a sound one from a family law perspective, then the answer is probably yes. Yes, you can protect your business to some extent, and certainly entities within a business from a family law claim, from a disgruntled in-law.

So, some examples of what has worked in the recent cases would be a unit trust with a corporate trustee. In that case, that structure had existed prior to the marriage, and the husband’s father was the managing director. The husband was initially a director but resigned in favour of a third party well in advance of separation, nearly a decade prior to the party’s relationship breaking down. And the husband was only ever a minority shareholder, with his father having four shares and him having two.

Now, this case of, Harris and Dual and another, another being the father and his entities, is very interesting because there was lots of evidence that the wife relied upon, which seemed quite compelling, and the parties hadn’t really complied with their own structure. And there was heaps of good material, which I’ll be running through at the Adviser Conference when you join us there we hope, about the sorts of things that the family got up to, but the way the structure was created and the underlying trust deed and the powers within it, and the roles that the members of the family had, meant that the wife’s claim failed.

Now, contrary to that are some other cases where, for example, it seems like the minute the in-law arrives on the doorstep, people are giving them shares, including them in the business, nominating them as partners, granting them roles on various boards and streaming income to them, and otherwise completely involving them in the intricacies of the business.

It will then be very difficult to say this structure is protected. So as always, it depends. Take advice about what you can do to improve your chances and those of your clients, if you’re advisers, about protecting the structure and the family business. We can’t wait to see you on the 27th and 28th at our Annual Adviser Conference. Thank you very much.