On behalf of Jenn McMillan of The Ross Firm Professional Corporation posted in Family/Matrimonial Law on Monday, November 7, 2016.
Go back even a quarter century. That's when marriage agreements (aka "prenups") were typically perceived as exotic, complex legal documents used only by the rich and famous. Nowadays, they're not. More and more prudent couples are discovering the benefits of these legally-binding family law instruments. Same goes for common-law couples, especially in Ontario where cohabiting spouses enjoy fewer legal protections than their married counterparts in key areas such as property division.
With about half of all Canadian marriages ending in divorce, our post this week looks at three possible scenarios in which a marriage or cohabitation agreement could prove to be a wise and foresighted investment.
Scenario 1: A Spouse Who Brings A Home Into The Relationship
If a husband and wife own a home, the law says that that this hefty asset must be split 50/50 in divorce – regardless of who owned it before the marriage or if it was a gift or inheritance. For common law couples, no such protections exist by right. For live-in partners, the spouse who brought the home into the relationship is the one who keeps it when the couple splits.
In the first instance, a marriage agreement could expressly state that the home and any increase in valued accrued during the marriage will stay with the original owner. In the second instance, a cohabitation agreement could stipulate that spouses will split the home equally, even though the law does not automatically grant that right.
Scenario 2: Children Whose Parents Provide A Sizable Loan Or Gift
Similar to our first scenario above, one party to a relationship may wish to protect an intergenerational advance such as a down payment on a home (a topic that we wrote about here). In fact, mom and dad might even insist on having a contract that lays down the rules in case their progeny's conjugal relationship does not last.
Scenario 3: Spouses Remarrying Later In Life
Individuals who enter a new relationship during the latter part of their life often have children from a previous relationship. In this situation, a marriage agreement could be the means by which each spouse protects their assets from the typical 50/50 split, thus ensuring that their children's inheritances will not be significantly impacted.
These are just three possible situations in which a marriage or cohabitation agreement might make sense, but there are others – typically involving complex family and financial structures.
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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.