Your Trust, Your Problem: When Family Trusts Won’t Shield Your Assets

Family trusts are commonly used as asset protection tools, but recent case law confirms their limits where control and benefit overlap.

The Full Federal Court’s recent decision in Filippini v Keystone Asset Management Limited [2026] FCAFC 71 (Filippini) has confirmed and strengthened a principle first established in ASIC v Carey (No 6) [2006] FCA 814 (Carey (No 6)): where a beneficiary of a discretionary trust also controls the trust through the appointor role, the trust will not provide reliable asset protection.

This article examines the key facts from these decisions and considers what they mean in practice for clients relying on trust structures, including important considerations for reviewing and restructuring existing arrangements.

The Cases: From Carey (No 6) to Filippini

In Carey (No 6), ASIC sought to extend receiver orders to trust assets held by a third-party trustee. French J held that where a discretionary trust is controlled by a trustee who is ‘the alter ego of a beneficiary’, the beneficiary’s interest approaches a contingent interest — and the court can reach those assets. Put simply: if the trust is genuinely independent, creditors cannot touch it; but if you are running the show, you cannot hide behind the structure.

Twenty years later, the Full Federal Court in Filippini endorsed and expanded this principle. The trust assets at issue included two properties and four luxury vehicles, held in discretionary trusts where Mr Filippini was the appointor and a principal beneficiary. Critically, Mr Filippini could appoint himself trustee, distribute all income and capital to himself, and accelerate the vesting day. In short, he had complete control. The Full Court confirmed that Carey (No 6) is good law, rejected subsequent decisions that sought to narrow it, and held that where a beneficiary controls what the trust does with its assets, the expectancy is worth preserving — and the court will freeze those assets to protect creditors.

What This Means in Practice

If a client is both the appointor (or controls the trustee) and a principal beneficiary of a discretionary trust, they should not assume that the trust provides reliable asset protection. Filippini makes clear that:

1. Any creditor can seek freezing orders over trust assets — this is no longer limited to ASIC applications under the Corporations Act 2001 (Cth).
2. The threshold is lower than previously thought — there is no need to establish a ‘contingent interest’ or ’approaching ownership’; an expectancy coupled with control is enough.
3. Pre-existing assets are not safe — the frozen assets in Filippini were acquired before any alleged wrongdoing.
4. Simply restraining the appointor's powers may not be sufficient — where the trustee is a different person from the appointor (which is the usual case), restraining the appointor alone will often not solve the problem.

Important Considerations

• Separate control from benefit: The most effective way to preserve asset protection is to ensure the person who benefits most from the trust is not also the person who controls it. Consider appointing an independent appointor — a trusted family member who is not a primary beneficiary, or an advisory panel.

• Review self-appointment powers: If the trust deed allows the appointor to appoint themselves as trustee (as was the case in Filippini), that power significantly increases the vulnerability. Consider whether it should be removed or made subject to an independent consent requirement.

• Consider the trustee structure: Where the appointor controls the corporate trustee (e.g., as sole director and shareholder), the combination of powers compounds the problem. An independent director, or a professional trustee, can reduce this risk.
• Existing clients may need to be informed: Clients who set up trusts years ago, on the assumption that the appointor role was consistent with asset protection, should be advised that the law has developed. Filippini is not new law, it is a clarification and strengthening of principles that have been in play since 2006.

The practical takeaway is simple: a trust on paper does not equal protection in practice if you are the one pulling the strings.

What Cleardocs Products Are Available?

Cleardocs offers the following relevant products:

• Trusts Documents

More Cleardocs information on related topics

• Discretionary trusts: Challenge to asset protection role
• To appointor or not to appointor