When people talk about prenuptial agreements (or marriage contracts, as they’re called in Canada), they often think these are documents reserved for the extremely wealthy who need to protect vast family fortunes before tying the knot. However, this is a myth. A marriage contract is something any person getting married should consider making before they take the plunge, as a way to protect themselves in the event the marriage breaks down at some point in the future.
Nobody likes to think about such things when they’re engaged and in love; it may seem crass or pessimistic to consider the possibility of a divorce before the wedding. But a marriage contract should not be considered a prediction for how the marriage will go. Instead, think of it as an insurance policy. You hope you’ll never have to use it, and there’s a chance you won’t. But you’ll be relieved to have it if you ever need it.
Below, we’ll outline why anyone getting married should consider signing a marriage contract and the most critical issues to address in the agreement to protect yourself and your family in the event of a future separation or divorce.
A well-drafted agreement can provide several benefits during and at the end of a marriage. A marriage contract’s terms can help ensure that each party is entering the marriage with a full appreciation of their financial position. It also outlines each spouse’s expectations on matters such as spousal support, should the relationship end. Perhaps most importantly, a marriage contract can help save considerable time and expense upon separation, as many of the key issues that may be a source of conflict have already been decided well in advance.
A marriage contract should address several factors, including the assets and liabilities each person brings into the marriage, as well as their preferences for how these assets will be treated should the relationship break down. Further, issues including future support should be clearly indicated in the terms of the agreement.
One or both spouses may have accumulated various assets and properties before the marriage that they may wish to retain as separate property in the event of a separation. This is particularly likely for marriages occurring later in life (or in the case of a subsequent marriage).
Under the provincial Family Property Act, all property owned by one or both spouses at the date of separation is subject to equalization between the spouses. However, there are certain exceptions, including:
In a marriage contract, spouses can address property they wish to keep separate from the equalization and division process in the event of a divorce. However, it is essential to ensure that separate property remains separate throughout the marriage, or it may lose its exempt status. For example, if one spouse were to inherit a large sum of money from a relative and then deposit the money into a shared family account, those funds could be considered shared family property for the purposes of equalization.
When one person comes into the marriage with significantly more debt than the other, it is in the other spouse’s best interests to include a term in the marriage contract that these debts will remain the sole responsibility of the debtor spouse.
If not addressed in a marriage contract, the obligations regarding spousal support are determined under the federal Spousal Support Advisory Guidelines, which help a court determine the frequency, duration, and amount of spousal support. However, couples are also free to set their own expectations for spousal support in a marriage contract. For example, if both people can be self-sufficient and wish to contract out of the expectation of spousal support at the start of the relationship, they may do so. Alternatively, they may want to cap support at a certain amount or for a particular duration, which can also be included in the terms of the agreement.
While it is possible to include terms setting out expectations concerning child support, parenting time, or decision-making ability in the event of a separation, these terms are generally not included in a marriage contract, even if the couple already shares children at the time the document is created. This is because any issues affecting a minor child upon separation must be determined with their best interests in mind.
Several factors must be considered at the time of separation to assess the child’s best interests, such as the ability of each parent to care for the child and the financial positions of each parent. These factors can change dramatically from the time a marriage agreement is created, and so any terms concerning the children in an agreement made far in advance will need to be amended anyway to reflect the current circumstances.
While it is true that a separation agreement can address all of the issues typically included in a marriage contract, as well as any terms about minor children, there are several advantages to having a marriage contract in place:
No, a marriage contract can be created at any point in the marriage, even if a couple has been married for several years. Many couples opt to make these agreements after their finances and business interests become more complex, and they want to protect their individual interests in case of a relationship breakdown.
Mincher Koeman has assisted countless clients with negotiating and creating cohabitation agreements and marriage contracts. We are experienced working with clients at every stage of life and with various financial concerns, from high-asset families with complex financial situations or family businesses to young couples looking to be proactive about their future. We will advise you of your rights and responsibilities and ensure that your interests are protected, no matter your stage in life. Please contact our office to make an appointment to discuss your matter with one of our lawyers today by calling us at 403-910-3000 or contacting us online.
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