An increasing number of Canadians are opting to sign a marriage contract, such as prenuptial agreements or post-nuptial agreements, to protect their assets before or during marriage. A common misconception is that a marriage contract is an early prediction of divorce. The reality is that we cannot predict the future and it is important to protect your assets. A prenuptial agreement can provide both partners with peace of mind throughout their marriage and certainty for the future.
What is a marriage contract?
A marriage contract in Ontario, is a legally binding contract between spouses that outlines assets, debts and other financial matters that will be impacted in a divorce. Prenuptial agreements, which are signed prior to marriage, are the most commonly known type of marriage contract. However, spouses may decide to sign a marriage contract after they are married. This is called a postnuptial agreement. Both contracts can specify the division of property and other financial arrangements to manage and protect individual and joint assets.
When should you sign one?
When you decide to sign a marriage contract depends on your relationship. Some couples know right away they want the protection a marriage contract provides and others do not. However, just because you did not sign a prenuptial agreement does not mean you cannot draft a marriage contract after marriage.
Whether you are already married or getting married soon, you should start talking about the marriage contract early. Having open and honest conversations with your partner before starting the process of creating your marriage contract will make the process easier.
What to know before creating a marriage contract
Seek Independent Legal Advice
Both spouses should seek independent legal advice before creating a marriage contract to ensure they fully understand its terms and implications. Your lawyer will help ensure you understand the terms, that the contract meets your needs and that it is legally binding. Independent advice helps confirm that the agreement is fair and that each party’s rights and obligations are clear, reducing the risk of disputes and the potential for coercion or unfair advantage.
Full Financial Disclosure
A marriage contract can be signed before, or after marriage and it requires full financial disclosure. In Ontario, both prenuptial and postnuptial agreements are contracts. They must be entered voluntarily and each party must understand the contract. Full financial disclosure includes all major assets, debts and liabilities. Both parties require this information to make an informed decision before entering into the marriage contract.
What can be included?
Your marriage contract can include terms for property division, debt allocation, spousal support, and inheritance rights. It also often addresses assets acquired before and during the marriage, outlines financial responsibilities, and includes provisions for future earnings and investments.
What cannot be included?
Marriage contracts cannot include anything related to decision-making responsibilities (formerly custody) or anything that would impact the best interest of the child at the time of divorce or separation. Any decisions related to the best interests of the child are established through the courts.
Additionally, the Family Law Act requires special treatment of the matrimonial home. The matrimonial home is the residence where both spouses lived during the marriage. There can be multiple matrimonial homes, such as a cottage or second property. Regardless of ownership history, both spouses have equal rights to the possession of the matrimonial home and must consent to its sale. You are unable to override these rights in a marriage contract. Only divorce, separation agreements or a court order can determine the treatment of the matrimonial home. Having said that, parties can deal with the equity in a matrimonial and contract out of the legislation to secure it for one party over the other.
Future Changes
While you can set out specifics within your marriage contract, things may change throughout your relationship, including property, debts and liabilities. As changes occur, it is important to update your marriage contract to reflect the reality of your current circumstances. Life events that may affect your marriage contract are having a child, changing professions, or a major change in financial circumstances. When any major life event occurs, both spouse should seek independent legal advice when updating their marriage contract. Furthermore, any changes should be incorporated in a formal amending agreement.
Creating and maintaining a marriage contract throughout your relationship with your spouse will allow you to discuss important financial matters together and take the necessary steps to protect your individual interests. Most couples shy away from marriage contracts because they involve discussing the possibility of separation. However, as divorce lawyers, we know how these agreements can simplify the process and avoid unnecessary disputes between spouses. Less dispute and simpler process, means significantly reduced costs to parties who are separating. Creating a marriage contract will give both partners peace of mind throughout the relationship.
Ready to start drafting your marriage contract? Contact Epstein and Associates for your Free Consultation.