Impact of Caldwell on Prenuptial Agreements (Binding Financial Agreements)

Impact of Caldwell on Prenuptial Agreements (Binding Financial Agreements)

In Australia, Caldwell’s case (Caldwell & Caldwell [2026] FedCFamC1A 81) delivered 11 May 2026 does not make prenuptial agreements (known as Binding Financial Agreements (BFAs) under the Family Law Act 1975) ineffective, but it does affect how parties should draft them when trusts are involved.

1.  Trust assets can no longer be assumed to be “outside” the relationship

Historically, some parties assumed that assets held in a discretionary family trust were protected from family law claims because the trust—not the individual— owned the assets.

Following Caldwell, if a party has effective control of a trust and can benefit from it, the trust may be characterised as that party’s property. This means that a BFA should expressly address trusts controlled by either party.

For example, a BFA may need to specify:

• Existing family trusts;
• Future trusts acquired or controlled during the relationship;
• How trust assets will be treated on separation;
• Whether increases in trust value will be excluded from

2.  More detailed disclosure will be required

A common reason BFAs fail is inadequate financial disclosure. After Caldwell, parties should carefully disclose:

• Trust deeds;
• Trustee arrangements;
• Appointor powers;
• Beneficiary classes;
• Trust financial statements;
• Any powers to appoint or remove

A trust that one party believes is merely a “family asset” may be viewed by a future court as their property because of the control they hold.

Failure to disclose these matters could create grounds to challenge the BFA later.

3.  BFAs should specifically address control rights

Caldwell elevates the importance of control mechanisms. When drafting a BFA, advisers may want to identify:

• Who holds appointor powers;
• Who can remove trustees;
• Who has succession rights to those powers;
• Whether those powers might pass to a spouse in the

The agreement can then expressly state how assets connected with those powers are to be treated in the event of separation.

4.  Intergenerational wealth planning becomes more important

One concern for families with significant inherited wealth is that trusts created by parents or grandparents may now more readily fall within the pool of assets considered in a family law dispute if a beneficiary controls them.

As a result, families may:

• Encourage children to enter BFAs before marriage;
• Review trust governance structures;
• Consider whether control should be shared among independent parties rather than concentrated in one individual.

A carefully drafted BFA can help preserve family wealth by clearly identifying which trust interests are intended to remain separate property.

5.  BFAs may reduce uncertainty but cannot override reality

A BFA can specify how parties intend trust assets to be treated. However, if a court later finds that one party effectively controls a trust, Caldwell suggests the court will still look at the actual legal and practical structure.

In other words:

• A BFA is a powerful risk-management
• But calling a trust “separate property” does not change the underlying facts about who controls it.

Accordingly, the trust structure and the BFA should be consistent with one another.

Practical example

Suppose a husband is the appointor of a family trust established by his parents and worth $20 million.

Before Caldwell, he might have argued:

“The trust belongs to my family, not me.” After Caldwell, a court may find:

“You can appoint and remove trustees and benefit from the trust, so it is effectively your property.”

A well-drafted BFA could still state that:

• The trust is to remain the husband’s separate asset;
• Any growth in the trust remains separate;
• The wife waives claims against the trust (subject to the BFA remaining valid and enforceable).

This may significantly improve the husband’s position compared with having no agreement at all.

Bottom line

Caldwell increases the importance of BFAs for people involved with family trusts.

The decision makes it harder to rely solely on the trust structure as protection from family law claims.

Parties who control discretionary trusts should ensure that any prenuptial or financial agreement specifically identifies those trusts, fully discloses their structure, and clearly sets out how trust-related assets will be treated if the relationship ends.

NOTE: An application has been made for leave to appeal to the High Court.

Disclaimer

Please contact us if you require further advice surrounding your or your spouses’ expenditure, post separation.

This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.