What is a Prenuptial Agreement?
A prenuptial agreement is a written agreement that couples make typically before they get married (although it is always possible to create one after the marriage has occurred). These agreements identify in writing what each partner wishes to preserve or exclude from dividing in the event that they ever separate and can also indicate how they might financially support one another. Examples of this can be equity in a home, benefits from a family trust, assets such as savings or RRSPs, spousal support, even debts (which function as assets if they are paid down during the marriage) or anything else one wishes to address, with certain exceptions below. Prenuptial agreements can also establish how the couple manages their day-to-day financial arrangements.
There are two types of agreements:
A cohabitation agreement is designed for people who intend to live together, or who are already living together but are not married. In the event that they marry, a cohabitation agreement is automatically converted into a marriage contract.
A marriage contract is drafted either before you get married where a date has usually been set or after, sometimes even years later.
If you decide to separate, the prenuptial agreement is converted to a separation agreement. If drafted fairly, couples will not need to renegotiate these terms.
Why is a Prenuptial Agreement Important?
There are four important reasons to consider a prenuptial agreement:
1) Control and Certainty – Prenuptial agreements give control and certainty over how property will be divided upon separation and/or what your intentions regarding support of one another will be in the event that your relationship ends. Without an agreement, your property will be divided based on the laws of your province and may even be decided by a third party who doesn’t know either of you or your family values, like a judge or arbitrator. Depending on your individual circumstances, this could result in significant losses to your family and people often feel as if they have no influence over what happens next. Therefore, a prenuptial agreement can serve as an upstream approach to indicate what will happen if you decide to separate later.
2) Improves Communication – That’s right! Think about it. Drafting a prenuptial agreement requires you and your partner to have an open, honest and meaningful conversation about your respective values, views and perspectives for the future. It’s a great opportunity to have candid discussions around finances, inheritance, employment aspirations (including what to do when you have children) and many of the other economic issues that couples often disagree about later. What is more, is that couples often don’t have these conversations before and are left to piece things together later. Discussing a prenuptial agreement helps open these lines of communication and address perspectives before they become issues! We have seen all too often that these types of communications become much more difficult, and sometimes impossible if attempted once you decide to separate. People forget what they agreed to (or find out that they were on completely different pages or even reading different books) and emotions are much higher then.
3) Cost – If the relationship comes to an end, a prenuptial agreement can prevent complicated and lengthy legal disputes, negotiations and court. A process that explores partners’ intentions and an agreement that is well-written from the outset will streamline the divorce process, resulting in significantly lower costs. In addition, it can help to reduce conflict between partners. This will ultimately allow you to move on to the next chapter in your life.
4) Fairness – In order for a prenuptial agreement to be valid, fairness is a fundamental component in the negotiation. This is not a process where one person has absolute say while the other has to accept what is happening. In fact, our team of highly trained, collaborative professionals work with you to identify your values, goals, needs, cares and worries. Ensuring that your partner works with another highly trained, collaborative professional is essential too. This is not an all-or-nothing situation, but one that is uniquely tailored to YOUR family.
Limits on Marriage Contracts
A prenuptial agreement cannot deal with issues about your children. Decisions about children must be made at the time you separate or divorce and must be based on what is in the best interests of the child, including decisions about who gets decision-making responsibility and parenting time. The “best interests” test looks at the child’s age, personality, routine, etc., at the time of divorce, to determine what is best for them and therefore cannot be dictated in advance.
There are also some other limitations that we can help explain.
We can help!
Choosing the right professionals to assist is essential. At Musson Law, our experienced divorce lawyers in Toronto team can help you. Our dedicated legal professionals can help guide you regarding various family law issues and help ensure you have a comprehensive agreement in place.
This information is not legal advice. If you need legal advice, please contact our offices at (416) 849-0491 (Toronto Offices) or (519) 840-0863 (Waterloo Region Offices) or one of the many excellent family lawyers in Ontario.