Marriage Contracts and the Matrimonial Home
Prenuptial Agreements or Marriage Contracts are not just for the rich.
Marriage is a partnership. Anyone entering into a partnership should understand the terms of that relationship and protect their rights with due diligence. That means most people, especially those individuals bringing assets into the marriage, should take the time to draft a Prenuptial Agreement or Marriage Contract.
How is Matrimonial Home Treated in Ontario Family Law Act?
There are many people who bring their residence into a relationship when they get marriage. They have worked long and hard to earn enough money to purchase their residence. Some people are not aware that the Ontario Family Law Act treats the Matrimonial Home differently than other assets.
Under the Ontario Family Law Act, upon the divorce, the parties divide the increase in their net worth from the date of marriage to the date of separation. Therefore, in determining each party’s Net Family Property each party is entitled to deduct the value of most of their assets as of the date of marriage. For example, if you have $100 in your bank account on the date of marriage and $900 on the date of separation, you must share $800, the increase in value of the asset, with your Do spouse. However, this is not the case with a Matrimonial Home.
How is Matrimonial Home Divided in Ontario if You Don’t Have a Prenuptial Agreement?
Pursuant to the Ontario Family Law Act, if you do not have a marriage contract, and you resided in the same house on the date of marriage as on the date of separation, you are not entitled to deduct the value of the Matrimonial Home on the date of marriage. It is an anomaly in the Ontario Family Law Act. Therefore, let’s assume that you owned a house on the date of marriage and the value of your house on the date of marriage was $400,000. You and your new spouse move into your house. You then continue to reside in your house until the date of separation. On the date of separation, the value of your house was $600,000. Therefore, your house has increased in value by $200,000. If your money was in a bank account the value of $200,000 would be part of your Net Family Property. However, since it was a Matrimonial Home, you would share $600,000 with your former spouse and NOT $200,000. It is clear that this is not fair. However, it is the law.
The situation would be different if on the date of marriage you moved into the house that you brought into the marriage with your spouse and then moved during the marriage into another house. If you resided in the second house on the date of separation, you WOULD be entitled to deduct the value of the house that you owned on the date of marriage.
The Benefit of Marriage Contract in Matrimonial Home Division
If you wish to ensure that you can deduct the value of the house that you brought into the marriage from your Net Family Property on the breakdown of your marriage, it is critical that you and your new spouse enter into a Prenuptial Agreement or Marriage Contract.
An experienced family lawyer can help you draft a Prenuptial Agreement that protects your legal rights and financial assets as well as help you and your spouse-to-be in order to avoid or resolve financial disputes before saying “I Do.”. If you are looking for assistance, one our Fine & Associates Toronto divorce lawyers would gladly help you through this.