The area and practice of family law is shaped by and evolves
through societal change, legislation, global events (like a
pandemic), and through judicial decisions of the Courts in Ontario
and across Canada. FamilyMatters is the Lerners Family Law
Group’s weekly update on how that change is being
made:
If you are reading this, you may have recently become engaged,
or purchased your first home with your partner. Whatever the
occasion, congratulations are in order!
While celebrating your newest milestone with your significant
other, someone (perhaps a relative or your real estate agent) asks
the million-dollar question: “Are you going to get a
prenup?”
A marriage contract (or a “pre-nuptial agreement” as
it is sometimes called) is a domestic contract governed by
Ontario’s Family Law Act. There are also
cohabitation agreements, which are contracts for when
people live
together (or intend to live together). A cohabitation
agreement
automatically becomes a marriage contract once a
common-law couple gets married, so they are treated similarly in
law in Ontario.
The thought of preparing a contract can be daunting to many,
especially if in anticipation of a wedding. Although it’s not
something you should lose any sleep over, preparing a contract
isn’t as simple as putting terms on a sheet of paper and
signing at the bottom.
To help you get started, we want to share with you a list of ten
things you should know about marriage contracts and the process of
preparing them.
1. DO YOU NEED ONE, THOUGH?
Not everyone needs a contract. Pop culture can lead us to
believe that signing a marriage contract is the responsible thing
to do, but if you and your partner are not seeking to waive or
modify any current or future entitlements, rights, and obligations
afforded by the law, then a contract may not be for you.
Certain property and support rights manifest at the date of
marriage. Even in cases where two people are not married, support
may be payable from one spouse to another if an entitlement arises,
and equitable remedies for property-related issues can be awarded
by a court in certain circumstances. People may agree to
arrangements that are different than what is provided by the law to
protect their finances. A consultation with a family law lawyer is
the best way to determine whether a contract is necessary to meet
your needs.
2. PLAN AHEAD.
A contract can take a long time to prepare, especially if
it’s in anticipation of a marriage. After you get engaged if
you choose to go with a contract, starting the process should be at
the top of your “to-do” list. Many steps might not be
evident at first. Financial disclosure is required; meetings with
your lawyer to discuss the desired terms of your contract and the
legal consequences; the negotiation process; and drafting of the
contract itself. This process can take several months.
If a lawyer believes their client is signing their contract
under pressure (because the parties are rushing to get one signed
before the wedding), that lawyer may not sign the Certificate of
Independent Legal Advice, a document that is usually appended at
the back of your contract wherein your lawyer states you have
received advice and understand the terms of your contract. Without
a Certificate of Independent Legal Advice, one may argue that the
contract should be set aside on the grounds that the
signator did not understand its nature and
consequences (although the success of such an argument
depends on the circumstances of each case). Some lawyers may not
certify a contract if it’s executed less than a month before a
wedding (this practice varies by the lawyer).
3. CONTRACTS CAN COST A LOT OF MONEY.
There are a lot of unpredictable variables that impact the
pricing of legal services. Be sure to request your lawyer’s
pricing and billing practices before signing a retainer. Some
lawyers offer flat fees, while other lawyers charge hourly. Some
lawyers will work with a junior lawyer and/or a law clerk, while
other lawyers work alone.
Think of your contract as an investment: you may spend a good
deal upfront, but you are doing so to achieve some level of
certainty with your future finances.
4. TWO TO TANGO.
Don’t forget that your partner may need a lawyer too.
Although one lawyer may prepare the first contract draft for your
partner’s review, a lawyer cannot represent both you and your
partner. From the moment you contact a lawyer, that lawyer cannot
assist or advise your partner.
You can’t force your partner to get their own lawyer, but
arguably, it’s better if they do. A lack of independent legal
advice can leave your contract open to being set aside. There are
other advantages to your partner having a lawyer, including
potentially streamlining the process.
5. CARDS ON THE TABLE.
You and your partner need to exchange financial disclosure. The
disclosure is usually comprised of income, assets, and liabilities
information.
- You can prove this with income tax returns, notices of
assessment, t-slips, and pay stubs. - Assets and liabilities are proven with monthly statements or
screenshots with account balances. For complex assets and
liabilities, such as a business interest, formal appraisals may be
required.
A Financial Statement or a Statement of Net Worth can summarize
this information, which is sometimes appended at the back of your
contract.
To some, gathering this information and providing it to their
partner tells them something they already know. To others, this can
seem like an invasive and time-consuming process. No matter how you
see it, preparing and exchanging financial disclosure is an
essential step in the process. According to
Ontario’s Family Law Act, a contract can be set
aside if
significant assets and debts are not disclosed when the contract
was made. Your financial circumstances give rise to some of
your obligations, rights, and entitlements upon separation. You may
not be able to fully understand the implications of an agreement
without knowing your partner’s financial circumstances.
6. WHAT A CONTRACT CAN’T DO.
Not everything you include in a contract is necessarily
enforceable in law. For example, a Court may disregard provisions
of a contract regarding a child’s “
education, moral training or decision-making responsibility or
parenting time” if they are not in the best interest
of the child. Also, your home may be
afforded special treatment and it may need to be dealt
with more carefully. Your lawyer will be able to tell you if your
desired terms are enforceable (and whether it may be best to leave
them out).
7. 50/50 SPLIT, RIGHT? MAYBE NOT.
A common misconception is that your partner will receive
“half of your stuff” upon separation. Although couples
may acquire certain property rights or have equitable remedies
available to them in certain circumstances, the foregoing is an
oversimplification of the property regime in law. Fortunately,
there are ways that a contract can limit your expose to certain
property-related claims.
First, you and your partner may decide whether to waive or
modify rights to an equalization payment.
Ontario’s Family Law Act says that the
spouse whose net worth (referred to as “
net family property” under the Family Law
Act) is smaller is entitled to an
equalization payment, which is one-half the difference between
you and your partner’s net worth at the date of separation.
Some couples may waive this right. In contrast, others may modify
it by agreeing that they will not share in any increase in value of
the property, such as a particular bank account or a beneficial
interest in a family trust. In Ontario, an
equalization payment is currently available to
married couples only.
Second, you and your partner may decide to include provisions
governing some property ownership. For example, if you own a
business, you may want to have terms that prevent your partner from
claiming an interest in your business; however, you may not
necessarily oppose sharing the potential increase in business
value. It’s important that the contract carefully defines all
nuanced instructions you may have regarding the treatment of your
property.
8. SPOUSAL SUPPORT PROVISIONS CAN BE SET ASIDE IN THE
FUTURE.
It’s important to understand that spousal support provisions
can be set aside in the future. Where there is a discrepancy
between earning potential or future career goals, one might seek to
limit (or eliminate) any future possibility of paying spousal
support to the other. A contract may be able to address this
concern but only to a certain extent.
If over time these spousal support provisions become
unconscionable, a Court may choose to set aside these provisions
(or perhaps even the entire contract) and order that a different
amount of spousal support be paid. This point is not meant to deter
you from including a spousal support release in your contract, as
this may play out differently on a case-by-case basis.
9. SHOULD I GET ANOTHER LAWYER?
Family and estates law often intersect, and the preparation of a
contract is no exception, so you may need to consider bringing in a
lawyer who can address these specific concerns. You may want to
consider adding provisions to manage your estate if you pre-decease
your partner before separation, as certain entitlements, rights, and obligations can
arise upon your death. You may also want to consider
preparing a Will simultaneously, ensuring that your Will dovetails
with your contract.
Keep in mind that not every family lawyer can assist with the
intricacies of estate planning. If your family law lawyer cannot
advise you on these matters, they can likely refer you to someone
who can. Some full-service firms, like Lerners, have lawyers on
staff to handle all of this at once.
10. BEFORE THE WEDDING OR AFTER, BOTH WORK.
A marriage contract signed after a wedding is just as
enforceable as before the event. What happens if you run out of
time before your wedding to make a marriage contract? Or, what
happens if you and your partner decide to change your mind about
the terms of your marriage contract? Depending on the provisions in
your initial contract, you may also be able to prepare a second
contract amending the provisions in the first one. A disadvantage
to a “post-marriage” contract is that certain rights
crystalize at the date of the marriage, which means that you lose
the opportunity not to marry your partner (and prevent them from
accruing certain rights) if they do not agree to your terms.
This is just a quick overview of a few of the considerations you
should keep in mind when considering a marriage contract. Meeting
with a trusted lawyer for legal advice, even if it is only for a
few hours, should always be your starting point.
Enjoy your big day!
The content of this article is intended to provide a general guide
to the subject matter. Specialist advice should be sought about
your specific circumstances.
