Prenuptial Agreement Waterloo
What is Prenup Agreement?
A prenuptial agreement, commonly known as a prenup, is a contract created by a prenuptial agreement lawyer for two people before they enter into marriage. The contract lists all the property each party owns and their debts. It also outlines what happens to the property in case of divorce. It outlines all the terms and conditions associated with the division of financial assets if the marriage dissolves.
Prenuptial agreements have traditionally been a sensitive and controversial topic for couples. For years, the media has portrayed prenuptial agreements as a tool that high net worth individuals and celebrities use to limit what their ex-spouse can get in case of divorce. Prenups can be difficult conversations to have with your partner, especially during the romantic and exciting time of your relationship. However, when used correctly, prenuptial agreements can be a fair way of distributing assets and responsibilities.
Contrary to popular opinion, prenuptial agreements are not limited to the rich and famous. While prenups are most common among high-net-worth persons, people with more mainstream financial status are turning to them for their own purposes. Prenups help couples to avoid arguments in case of divorce, clarify financial rights, pass separate property from prior marriages to their children, and get protection from debts.
What Should Be Included in a Prenup?
Prenuptial agreements are created to address certain concerns and protect certain rights of each partner before marriage. These include the financial rights of every person, how assets will be allocated between a couple, each spouse’s financial responsibilities in a marriage, and the division of property in case of divorce. Below are some of the areas that can be addressed in a prenuptial agreement.
- The distinction between separate and marital property – separate property refers to the assets each spouse owned before marriage, while marital property includes assets the couple acquires throughout the marriage. Separate property also includes property acquired through inheritance. The prenup will outline how these properties are treated in case of divorce.
- Protection against the other spouse’s debts – without a prenuptial agreement, marital property can be seized by creditors, even if only one spouse is the borrower.
- How children from previous marriages will be treated – a prenup ensures that children from previous marriages inherit some property in case of a divorce.
- Waiver of spousal support rights – the lower-earning spouse could be entitled to support rights under certain circumstances. A prenup can enforce the rights or waive them.
- Protection from estate plans – prenuptial agreements serve as excellent estate planning tools alongside living trusts, wills, and other documents.
- Each spouse’s marital responsibilities can be outlined in a prenup, including how to manage joint accounts, who will handle household expenses and each spouse’s contribution to the savings account.
What Should Not be Included in a Prenup?
There are certain legal restrictions as to what you can include in a prenuptial agreement. Including unlawful information in a prenuptial agreement could make the judge set aside parts of or the whole prenuptial agreement. Below is a list of things that are not allowed in a prenuptial agreement:
- You cannot include a provision detailing something illegal in a prenuptial agreement
- Decisions regarding child custody and child support – the court has the final say in computing child support; a prenup cannot include child support details, child visitation, or child custody.
- Provisions that encourage divorce – the agreement should not include anything that seems to offer a financial incentive for divorce.
- Information on personal instead of financial issues – a prenup should not include personal preferences like information on child-rearing, where to spend holidays, and who handles which chores
Do I Need a Lawyer for a Prenup?
It is not a legal requirement to hire a lawyer to help you with a prenup agreement. However, if you want to end up with a clear, legally-binding prenuptial agreement, you should seek the help of a skilled lawyer. In fact, you will need two lawyers: one for you and the other for your fiancé. Before your lawyers draft the prenuptial agreement, you and your soon-to-be spouse should decide on the essential terms of the agreement.
Courts scrutinize prenuptial agreements closely. If your prenup is to pass this scrutiny, you need a lawyer to advise you. A lawyer will help you and your fiancé to create a prenup that you both understand and one that doesn’t make you feel taken advantage of.
Frequently Asked Questions
Below are the frequently asked questions regarding prenup agreements:
You should consider signing a prenup if:
- If you own a home or any property, especially if you are planning to live in that home after marriage.
- You have a pension.
- You have been married before, and you want to protect your separate assets and also preserve wealth for your children.
- You have children from a previous marriage, and you want to keep some assets or inheritance for them.
- You have your own investments and businesses, and you want to retain control of them
- You are bringing property or assets to your marriage that would be difficult to split
- You want to protect assets of money that you expect to receive from a future inheritance
Perhaps your partner had accumulated some debts before marriage. You can include a clause in your prenuptial agreement to state that you are not responsible for these debts or these debts won’t be included in the equalization. This will ensure that even if you divorce your partner, their debts will not be repaid from your joint assets or will increase one side’s equalization payment.
Prenups are particularly important if one partner expects to receive more assets than the other. Perhaps you own a family farm or business or expect to inherit significant property. A prenup will help you safeguard these assets in case of divorce.
Prenups are not just for the rich. Even if you don’t own much, a prenuptial agreement ensures that in case you and your partner part ways, you will have an amicable divorce. You will not have to fight for assets because the agreement will outline what should happen to your separate and marital assets in case of divorce.
Again, your circumstances could change in the future. Your rich relative might decide to leave you an inheritance. Your struggling business might flourish in the future. Any wealth you make while married will be considered a fruit of the marriage and will be shared with your partner in the event of a divorce.
You can say that you will cross the bridge when you get there. After all, why should you work with projected wealth? However, it is important to understand these possibilities and talk to your lawyer about the consequences of not having a prenup.
It might seem extremely unromantic to request a prenuptial agreement. It could appear like you are suggesting that your marriage will fail before you even get married. The reality is that divorce is a possibility. A significant percentage of marriages in Canada end up in divorce. You should discuss this unpleasant possibility openly and honestly. Discussing a prenuptial agreement is just like making a will. The topic may not be pleasant, but it’s obviously crucial.
A prenuptial agreement is only valid if it follows the requirements laid out by the law. For a prenuptial agreement to be valid, it should:
- Provide full disclosure of the spouses’ incomes and assets
- It should be fair to both parties
- The agreement should not appear like a financial incentive to get a divorce
- Both parties should be in agreement on the provisions of the prenuptial agreement
- Both parties must have entered the prenuptial agreement freely, without pressure from either party
- Both spouses should fully appreciate the consequences of signing a prenup. The parties should exchange comprehensive financial disclosure, seek separate legal counsel, and have a mutual agreement that the contract is enforceable.
Even if a prenup satisfies all the requirements outlined above, there may still be other areas of concern with having the agreement upheld. The agreement requires an in-depth analysis of the law to make it valid. Working with a lawyer is important to ensure the validity of a prenuptial agreement.
Even if it is not mandatory to consult a lawyer when drafting a prenuptial agreement, you should consult one. The court is more likely to approve the prenuptial agreement if both parties sought proper legal advice prior to signing the agreement. The court may disregard an agreement signed without consulting a lawyer, especially if the prenup was signed too close to the wedding, financial disclosure was absent, and the terms of the prenup appear to be unfair.
Perhaps you are wondering whether you and your partner can use the same lawyer to save costs. No, it is important that each spouse receives independent legal advice before signing a prenup. If you both use the same lawyer, the court might give less weight to the agreement.
If your spouse wants to challenge the prenup agreement, he or she will be required to prove to the Court there is a legal basis to overturn the agreement. This is expensive and costly, and if your spouse loses on the challenge, they will be responsible for your legal costs. Courts do not automatically reinforce prenuptial agreements. They do not like to interfere with what a couple agreed to prior to marriage. These agreements carry significant influence when the court is deciding the issues surrounding the divorce proceedings. You are far better off with a prenuptial agreement than without one. Some of the areas you should look out for include:
- You should have signed the prenuptial agreement at a reasonable time, preferably at least two months before the wedding. If the agreement was made immediately before the wedding, the court might assume that one party put pressure on the other.
- The agreement must have been entered into without any party imposing pressure or duress on the other.
- Every party must make full disclosure of assets
- The parties should have sought independent legal advice
- The terms of the prenuptial agreement should be fair and reasonable
If the prenup meets all the requirements outlined above, it will be difficult for either spouse to challenge the agreement.
As its name suggests, a prenup is drafted and signed before the wedding. Pre means before. However, you can set up a similar agreement after getting married. This is known as a postnuptial agreement. You can sign a postnuptial agreement at any point in your marriage. A postnuptial agreement is legally binding, just like a prenuptial agreement. Many couples like to put together this agreement when there are significant financial changes in their lives. When you are already married, it is less likely that there is an issue of coercion or duress from the other partner.
If there is no prenup in place, the law at the time of break-up decides how the property you own during the marriage will be divided. When it comes to the matrimonial home, the law may even decide what happens to the property you acquired before marriage. If one spouse incurs debts during the marriage, the other spouse may have to pay for these debts. The spouses will also share rights over marital property, sometimes even the right to sell the property.
The costs of drafting a prenup depend on the complexity of the agreement. Therefore, the exact cost will depend on your circumstances. Some of the influencing factors include whether there are children from previous marriages, the nature and amount of your assets and whether there is an international element. Your lawyer will give you an estimate of the cost. In general, a basic prenup will cost about $5000. It’s a great return on investment. If you would have otherwise been required to pay $100,000 in the divorce, but with a prenup, you preserved those assets, the cost is well worth it. You also can avoid paying lawyer fees on breakup fighting over dividing assets.
The decision to enter into a prenuptial agreement is very personal and requires buy in for both parties in a relationship.
Reasons a Prenuptial Agreement Might be Invalid
Prenups have to be properly drafted in order to be valid to avoid the stress and expense of fighting over money in a break up.
Prenuptial Agreement Benefits and Drawbacks
There are many benefits to signing a prenuptial agreement, especially if you and your partner have significant assets.
Can Your Prenuptial Agreement Be Modified after Your Marriage?
A prenumptial agreement may be modified after you’re married depending on the local law and the specific terms of your agreement.