Moving Assets Out of Reach: What Clients With Family Trusts Need to Know Before Trying to Defeat a Claim

It is one of the most common questions an estate planning lawyer hears: “Can I move my assets into a trust, or into my son’s name, so that a particular child can’t make a claim when I’m gone? The instinct is understandable; parents want certainty that their wishes will be followed and that a strained relationship or a history of problems will not translate into a fight over the estate. But the strategy is far more fraught than most people realise, and a recent decision of the New South Wales Court of Appeal shows both how it can be done and how easily it can unravel.

McLennan by his tutor Kennedy v McLennan [2026] NSWCA 102 is a cautionary tale for anyone who holds assets in a family trust and is thinking about restructuring to keep them “out of reach”. It is also, unusually, a case where the very same person who set up the arrangement later tried to tear it down and failed. The lessons for clients are important.

You cannot simply “trust away” a family provision claim

In New South Wales, Chapter 3 of the Succession Act 2006 (NSW) allows an “eligible person", including a child of the deceased, to apply for a family provision order if they have been left without adequate provision for their proper maintenance, education or advancement in life. If the Court decides that provision should be made, it looks first to the assets of the actual estate.

Here is the critical point that trips up so many asset-protection plans: New South Wales is the only Australian state with a “notional estate” regime. Under sections 75 to 80 of the Act, where property has been moved out of a person’s estate through a “relevant property transaction", for example, a transfer of the family home into a child’s name or the surrender of control over a discretionary trust the Court can designate that property as notional estate and claw it back to satisfy a family provision order. The regime is designed precisely to catch attempts to defeat claims. Transactions taking effect on or after death, those made within one year of death where a moral obligation was owed, and those made within three years of death with an intention to defeat a claim, are all potentially reachable.

In other words, moving assets around does not make a claim disappear. It may simply add cost, tax and complexity and still leave the assets exposed.

The facts: a deliberate plan to put assets beyond a daughter’s reach

The story is a textbook example of the strategy. John McLennan and his wife Karen, a retired pharmacist and nurse, had built a substantial fortune, a marital home at Macmasters Beach worth around $3 million, a property in Japan, a self-managed super fund holding some $7 million, and two discretionary “McLennan Family” trusts holding around $10 million in commercial property between them. They had two children: a son, Ruskin, and a daughter, Susannah.

Over a decade, John and Karen progressively restructured their affairs to put Ruskin in control and to limit what Susannah could access. The evidence was blunt about the purpose. A financial planner’s file note recorded that estate planning was discussed “with the objective being to ensure Ruskin assumes control of most assets, with the view of limiting access to funds by Susannah”, and that “it is expected that Susannah will contest the Will”. A handwritten “letter of intent” cited Susannah’s history of mental health and alcohol issues as the reason the trust should be managed solely by Ruskin.

Two transactions sat at the centre of the case. First, a deed of appointment under which John gave up his role as “appointor” of one of the family trusts (the Lakshmi Trust) and installed Ruskin in his place permanently surrendering his power to control that trust. Second, a transfer of the marital home to Ruskin, with John and Karen retaining a life tenancy so they could live there for the rest of their lives.

Significantly, the lawyers advising the family had squarely raised the notional estate problem. Their advice explained that assets in a super fund or discretionary trust “may be deemed ‘notional estate’”, that lifetime transfers within three years of death could be clawed back, and critically, that the reason to remove John as appointor of the trust was that, so long as he retained the power to control the trustee, a court could designate the trust’s assets as notional estate. The transactions were structured the way they were because of the notional estate rules.

Then the plan turned on its maker. After Karen died in 2022, Susannah moved in with her father, John’s relationship with Ruskin broke down, and John came to believe Ruskin had taken advantage of him. John made a new will leaving everything to Susannah and commenced proceedings to undo the very transactions he had set up arguing that the transfer of the home and the surrender of the trust appointorship should be set aside because Ruskin had engaged in unconscionable conduct.

The decision: no unconscionable conduct, transactions stand

Both the primary judge and the Court of Appeal rejected John’s claim. To set a transaction aside for unconscionable conduct, a person must show that they were under a “special disadvantage” some serious disadvantage or disability affecting their ability to make a judgment in their own interests, and that the other party unconscientiously took advantage of it. John could not establish either.

The Court found there was no evidence that Ruskin had pressured his parents into the transactions. John was an experienced businessman and investor; his cognitive functions had not significantly declined at the relevant time; and he plainly understood that the deed of appointment permanently stripped him of control of the trust and that the transfer gave the home to Ruskin subject to a life tenancy. That understanding was the whole point of the exercise.

John’s main argument was a subtle one: that he had received advice only on the legal effect of the transactions, not “evaluative” advice on whether they were a good idea or actually necessary to achieve his goal. The Court gave this short shrift. The role of independent advice in these cases is to make sure the weaker party understands the consequences of what they are doing; there is no rule that the advice must be “evaluative” or must weigh up the merits. John had the opportunity to obtain, and did obtain, extensive legal and financial advice. Given his experience and capacity, he was perfectly able to assess the merits himself. The appeal was dismissed with costs, and because the unconscionability claim failed, his family provision claim against Karen’s estate fell away with it.

The lessons for clients with family trusts

McLennan is instructive precisely because the asset-protection plan survived the challenge, but only after years of litigation, two court hearings, and enormous cost. Several lessons stand out for anyone considering moving assets to defeat a future claim.

Understand notional estate before you restructure. In New South Wales, transferring the family home or surrendering control of a discretionary trust does not necessarily put those assets beyond a family provision claim. The Court can reach back and designate them as notional estate. Any plan that assumes assets are “safe” simply because they sit in a trust or in a child’s name is built on a misunderstanding of NSW law.

Giving up control is real and permanent. John surrendered his appointorship of a multi-million-dollar trust and transferred his home. When the family relationship later broke down, he could not get either back. Handing control to one child exposes you to the risk that the relationship sours and to complete dependence on that child’s goodwill. That is a heavy price for an uncertain benefit.

Count the tax and cost. As the McLennans’ own advisers flagged, transferring a high-value property can trigger stamp duty and ongoing land tax (particularly if held in a trust) and can have capital gains tax consequences. These are real, immediate costs incurred to chase a protection that may not hold.

Weigh the alternative: adequate provision. Notably, the family’s own counsel advised that a larger bequest to Susannah in the range of $1.7–$1.9 million would likely be seen as appropriate and that “whatever bequest is made, there is no guarantee that a claim will not be made”. Often the most cost-effective protection against a claim is to make reasonable provision in the first place and document the reasons for the overall plan, rather than to engineer assets out of reach.

Get genuinely independent advice and create a clear record. The transactions here withstood challenge largely because there was a detailed paper trail: file notes recording the client’s understanding, capacity assessments, and separate meetings with the solicitor. Whatever your plan, contemporaneous evidence that you understood and freely chose it is invaluable, and independent advice, given to you directly rather than filtered through the family member who benefits, is essential.

Remember that these plans can be challenged from every direction. A disappointed beneficiary may attack the arrangement; but as this case shows, so too may the person who created it, if circumstances change. Robust, well-advised, well-documented planning is what makes an arrangement durable.