What Exactly is a Prenuptial Agreement?
Do you worry about losing your assets or a big part of your net worth in the event of a divorce? To put your mind at ease before getting married, you can sign a legally binding contract called a prenuptial agreement or marriage contract. In a prenup, you can outline what property, assets, investment and bank accounts, and retirement funds, including pensions, will remain solely yours in the event of a divorce. This includes not only the value of the assets on the date of marriage but any increase in their value, on the date of separation.
Such assets, as well as any future appreciation in value, may be excluded from the prenuptial agreement’s property division and equalization provisions. Protecting a family’s wealth can also be done through a prenuptial agreement. Any prenuptial agreement worth its salt will outline the distribution of marital assets in the event of a breakup.
Without a prenup, marital assets will be divided as per the law. Although it may seem unfair to many couples going through a divorce or separation, the common misconception that property is divided equally is more often than not, not the case. Therefore, before getting married, a couple should speak with a prenuptial agreement lawyer in Kitchener and Guelph who can help them draft a document that will safeguard their respective financial interests.
What Should a Prenuptial Agreement Contain?
A well-drafted prenuptial agreement should make the division of assets clear in the event of a divorce. The document need not be complex, but it should be written in such a way that it can withstand scrutiny by a judge. There are certain standard provisions that need to be included in the agreement.
The agreement must be mutually beneficial and fair. Some options include outlining financial assets that won’t be split during a divorce, such as:
- Investment accounts
- Bank accounts
- Real estate
- Cash
- Stock options
- Pensions
- Business interests
- Specialty art
- Jewellery
- Inheritances
- Debts that won’t be included in the equalization process — this is especially important if either spouse has significant debts
There are some other issues that arise with debt and your lawyer can explain them to you, such as what to do if the debt is settled before the divorce is finalized. It may also be imperative to exclude some of your property from equalization for the benefit of your children. This will help to protect their interests as they enter adulthood. It also safeguards their best interests if one parent dies.
Spousal support, if any, can be defined in terms of whether or not it is necessary, the amount, and the duration, all of which can be included in a prenuptial agreement. Sometimes couples will agree that neither will claim support from the other in a prenuptial agreement.
What Should Not Be Included in a Prenuptial Agreement?
Parenting time and child support cannot be included in a prenuptial agreement. Divorce-related issues involving children are governed by the law.
Including terms that are unfavorable to the matrimonial home, such as requiring one spouse to move out after a divorce, is not permitted. Both spouses have an equal claim to the marital residence regardless of whose name appears on the title.
There should be no provision for what will happen if your partner cheats. The mere presence of an infidelity clause in the prenuptial agreement isn’t sufficient to warrant judicial interevention.
Remember that the purpose of a prenuptial agreement is not to hasten the end of a marriage. If the terms of the prenuptial agreement are deemed to be too harsh or unreasonable for a reasonable person to accept, the court may rule that the agreement is invalid.
Do I Need a Lawyer for a Prenup?
A prenuptial agreement is typically binding whether or not drafted by a lawyer. In other words, the presence of a lawyer isn’t a requirement when drafting a prenuptial agreement. Nonetheless, the agreement must comply with all applicable laws, which is usually not the case with most handwritten or electronically generated contracts.
The most significant danger of creating a prenup without the assistance of legal counsel is that it may not be valid in a court of law. It’s wise to have a prenuptial agreement drafted by an experienced lawyer. It is recommended to consult a lawyer when drafting such documents to make sure all provisions are legal and binding.
If you want to protect your assets in the event of a divorce and steer clear of financial problems in the future, getting a lawyer in Guelph to review the prenup is a good idea.
Contact us to help you resolve your case.
Frequently Asked Questions
Are marriage contracts the same as prenuptial agreements?
Marriage contract is the term we use in Ontario for what most people know as a prenuptial agreement or a post-nuptial agreement. Marriage contracts can be signed both before or after the wedding. In both cases, a prenuptial or post-nuptial agreement will dictate how the assets and debts of each spouse will be divided. A prenup is a contract signed by a couple before they get married and a postnup is signed after they are married at any time, as long as it is before separation. It sets out the financial terms if they ever separate or divorce.
What does the term “cohabitation agreement” mean?
A cohabitation agreement is an agreement signed by couples living together but who aren’t married and aren’t planning on getting married. For such couples, signing a cohabiting agreement is just as important as signing a prenup agreement. Essentially, this agreement outlines what would happen to their assets and debts if they decided to part ways. It can also address other issues, such as spousal support payments and duration and amount of spousal support payment. Many couples wrongly assume that because they are not married there is no obligation to share assets or their net worth. This is not always the case and a cohabitation agreement will protect against any of these claims.
What’s the best time to get a prenup?
Discussing a prenuptial agreement before your wedding can be a difficult conversation to have. However, it’s best to tackle it as soon as possible. For couples who “run out of time” before the wedding to sign the agreements, they will agree to the terms and simply sign the agreement shortly after their wedding ceremony to avoid any issues that could negatively impact their big day.
Are premarital agreements similar to postmarital agreements?
Some couples opt to make a written agreement of what would happen to their assets and debts in the event of divorce (prenuptial agreement) before their wedding. Alternatively, postnuptial agreements can be created after the wedding has already taken place. The agreement typically outlines how the spouses’ assets and debts are to be shared, as well as spousal support, if applicable.
Any clauses related to child support, parenting agreements, or decision-making should not be included in the postnuptial agreement as they won’t be upheld by a judge if the agreement is challenged. Both pre-and post-nuptial agreements are legally binding once signed.
Can I be evicted after signing a prenuptial agreement?
The matrimonial home is the place where a couple resides after their wedding. By law, both parties have the right to live in the matrimonial home, regardless of who owns it. This means that a conditional prenuptial agreement or one requiring a cheating spouse to leave the family home is not enforceable.
However, a prenuptial agreement can specify who owns what if a divorce takes place. It can also detail how the proceeds from the sale of a shared home are split. Without such an agreement, each partner is entitled to an equal share in the marital home, regardless of whose name is on the title. Consequently, prenuptial agreements are crucial for protecting the interests of a spouse who has put more financial effort into the couple’s shared assets or who owns a property prior to marriage that becomes the matrimonial home.
Do I really need a prenup?
If you’re a homeowner with investments, a pension, RRSPs, or savings, a prenuptial agreement is a must. If your parents partially finance your house purchase, you need one more than ever, so your parents are not left without an option to recover their investment.
Contrary to popular belief, prenuptial agreements are not just for the wealthy. Prenups can help anyone protect their assets and income in case of a breakup. If your prenup is legally sound, it can guarantee fair terms that cannot be overturned by a court.
Explain to your partner why signing a prenuptial agreement is best for both of you. Let your partner know why it’s important and how it not only helps you but the whole family. Some couples use prenups as tools to preserve inherited property or assets they’ve had in their families for years. The idea here is to make sure that both sides have certainty and financial security in the event of divorce.
Be honest about why you want one – even if it’s just for security. Discussing openly and honestly with your spouse can lead to a more satisfying relationship down the road. Make sure that reviewing prenuptial agreements is one of the things you do well before your wedding day.
Can a prenuptial agreement be challenged in court?
Prenuptial agreements that are drafted properly and equitably are very hard to dispute in court. To ensure your prenup is legally enforceable in Guelph, it’s advisable to hire a qualified legal professional to help you ensure you are protected. During the drafting process, both spouses must disclose all financial information to ensure the agreement is enforceable.
When can a prenuptial agreement be nullified?
If you feel like the prenup you signed should be nullified, you should speak with a lawyer. An Application will be filed by your lawyer asking the court to set aside the contract, or parts of it, and to treat it as though it never existed. Can you imagine putting all this work into a prenuptial agreement and then it is all for nothing! This is why it’s important you speak with an experienced prenup lawyer.
The three most common justifications for a prenup to be set aside are as follows:
- Either the signatory felt pressured into signing (duress)
- To the extent that it is deemed extremely unfair (unconscionable)
- If there was any kind of deception or misrepresentation, like one party failing to reveal a significant asset
You still bear the burden of proving to the court that there was no way to avoid signing the agreement, even if you were forced to do so. The majority of couples choose not to sign prenuptial agreements because they are generally considered to be unfavourable and unfair. However, this does not need to be the case. It does not need to be an all-or-nothing option. Couples often time agree to share assets in a different, more fair way so they are both financially secure in the event of divorce.
What are the consequences of not disclosing all my assets in the prenuptial agreement?
The couple must disclose all assets that are subject to the prenup. If any assets or debts are left out of the prenup, this is the fastest way for the prenup to be set aside. Even the terms that would have been enforced by a Court may now be set aside entirely. Avoid wasting time and money on a prenuptial agreement that cannot be enforced by providing all relevant information.
Frequently Asked Questions
- Is a prenup agreement part of a marriage contract?
The terms marriage contract and prenuptial agreement are often used interchangeably. However, there are different types of marriage contracts, and a prenup is one of them. The prenuptial agreement is a contract that is signed before a couple marries, that provides clear provisions on what would happen to each party’s assets and debts in the event of a breakup. Couples sign this document before getting married to address issues that may impact their net worth after a divorce.
- What is a cohabitation agreement?
If a couple is not planning on getting married, but they are living together in this is considered cohabitation, they can sign a cohabitation agreement instead of a prenup. This agreement stipulates what would happen to their assets and debts should they break up. The cohabitation contract can also address spousal support matters – how much and how long it will be paid, if spousal support is paid at all.
- Is there an ideal time to get a prenup?
It can be difficult to bring up the topic of signing a prenup with your partner. However, the sooner you express your intention to have a prenup, the better. Most couples will even sign a prenup after their wedding to avoid rushing into it weeks or months leading up to the big day.
The most important thing is to ensure that your partner has adequate time to process the idea, especially if you didn’t discuss this while dating.
The entire process of preparing the prenup will take some initiative from you and your partner. You will need to provide information about your assets and debts, including putting together your financial statements.
You can each have a separate lawyer so that you have someone to properly explain to you exactly what you’re about to sign.
- Is a prenup the same as a post-nuptial agreement (postnup)?
Some couples prefer to sign an agreement that stipulates the terms of their divorce after their wedding. In this case, this document is called a post-nuptial agreement. The only difference between a prenup and a postnup is that the latter is signed after the wedding. The postnup will also include details on which assets will be divided, how debts will be shared and the terms of issuing spousal support, if any. Similarly, the post-nuptial agreement shouldn’t have provisions on child support, parenting time and decision making. Both agreements are legally binding once they are signed.
- Can I be kicked out of the family home after signing a prenup?
The home that you and your spouse lived in after getting married is considered the matrimonial home. The law stipulates that each person has a right to live in the matrimonial home regardless of the person whose name is on the title. This means your spouse cannot kick you out of the family home even if you signed a prenup. However, the prenup can have provisions that will determine who will keep the property when you divorce. Prenup terms may also determine how any proceeds from selling the family home will be divided. If a prenup doesn’t exist, both persons will have equal rights to the matrimonial home regardless of who is on the title. That’s why prenups are important to help protect the person who contributed more to the property in the relationship.
- How can I tell if I should get a prenup?
If you own a home, have any investments, a pension, RRSPs, savings or a pension, a prenup is a must. If your parents are lending or giving you money to purchase a home, you need to sign a prenup. Contrary to what most people think, prenups aren’t just for the super-wealthy. You should consider signing a prenup to protect your income or assets from the equalization of property, which can be somewhat unfair if one person is contributing more or brought more to the relationship than the other. Signing a prenup doesn’t mean that your spouse will be left destitute after the divorce. This contract must be fair. Any prenup that is outrightly unfair and one-sided can be challenged in court and overturned by a judge. These agreements are only in place to help ensure that there is some form of protection after a breakup.
- How do I convince my partner to sign a prenup?
Discussions about prenups can be part of your overall discussions about your finances. Explaining why you think a prenup is a good idea will help your partner feel more open to the idea. Open up to your spouse regarding your desire to have a prenup in place. Be honest when sharing your reasons for wanting a prenup. Some of our clients have signed a prenup to protect their family inheritance or preserve special family assets that have been there for decades. We know that couples have unique needs when signing a prenup, and we can help you avoid the emotional distress that comes with losing family assets you truly treasure.
If you’re getting a prenup simply because you want to be sure that you will be taken care of, be honest about it with the other person. At the end of the day, clear and honest communication regarding finances will create a more fulfilling relationship.
It’s best to add this conversation about a prenup when talking about finances with your partner. It should be just another item on your checklist that you want to go over before tying the knot.
- What can make a prenup be challenged in court?
Even though there are situations where prenups are challenged in court, this is often quite difficult to do with a properly drafted and fair agreement. When a prenup is properly prepared, it’s very hard to challenge it. Working with an experienced prenup lawyer in Kitchener helps to ensure that the agreement follows the law. The prenup lawyer should advise clients on full and honest financial disclosure to ensure the contract is enforced.
- When can a prenuptial contract be set aside?
Call a lawyer if you suspect that the prenup agreement you signed should be set aside. Your lawyer will apply to the court, requesting the judge to either throw out the entire agreement or provisions that may be considered invalid.
The 3 main reasons why a prenuptial contract may be set aside are:
- If one person signed it under duress or pressure;
- If it is considered very unfair (unconscionable); and
- If there was some form of fraud or misrepresentation, such as a party failing to provide full disclosure of assets.
Even if you were under pressure to sign the agreement, one must prove to the court that there was no realistic alternative but to submit to that pressure. Most prenups are set aside because they are considered one-sided and unfavourable.
You have two years from the time you find the contract to be unfavourable to apply for it to be set aside.
- What happens if I hide or fail to disclose all my assets in the prenup?
Any assets that are covered in the prenup should be disclosed. If you fail to include all assets and debts in the prenuptial agreement, it is very likely to be overturned. Therefore, to avoid spending your money and time on a prenup that will not be enforceable, ensure you provide full disclosure.