There is more to marriage than just a party with a DJ and catered food. Getting married is a serious legal undertaking which involves significant financial consequences. I realize that discussing a marriage contract with your spouse can be extremely difficult and may spoil the mood. Marriage contracts are not for everyone – but they may be helpful for some (if they can muster up the courage to discuss the contract with their spouse).
What happens to your property when you do not have a marriage contract?
The Family Law Act (the "FLA") is the legislation that applies to property upon marriage breakdown – it provides default regime for those of us who do not have contracts. The philosophy of the FLA, is that subject to certain exceptions*, any financial growth during the marriage is to be shared equally by both spouses. Accordingly upon marriage breakdown caused by separation or death, a calculation is done for each spouse to determine the growth in the value of that spouse's assets during the marriage. The FLA then prescribes that a payment is to be made by one party to the other to provide for equal financial growth during the marriage.
Please note a common misconception is that parties will end up with the same net worth on marriage breakdown – this is not necessarily true, especially if one spouse came into the marriage with significant assets!
The exceptions mentioned above relate primarily to the matrimonial home, inheritances and gifts. Note that if you are living in the same home at the date of marriage as at the date of separation or death, the entire net value of the home is shared equally between the spouses, but if you move homes the entire net value of the home is NOT necessarily shared equally between the parties. The court may award a spouse an amount that is more or less than half the difference between net family properties if the court is of the opinion that equalizing net family properties would be unconscionable.
Parties wishing to opt out of the property provisions of the FLA can enter into a marriage contract to provide for different provisions than contemplated in the FLA. Among other things, a marriage contract may deal with: – property; – support obligations; and – directing the education and moral training of children.
Note that if you decide to enter into a marriage contract the court may set aside a contract for various reasons including if: – If a party failed to disclose to the other significant assets or significant debts or other liabilities existing when the domestic contract was made; – If a party did not understand the nature and consequences of the domestic contract; and – Otherwise in accordance with the law of contract.
Further the court may disregard any provision of a contract respecting provision for support if: – the provision results in unconscionable circumstances; – the provision relates to a dependent who qualifies for social assistance; or – there is a default in paying support under the contract.
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.