Marriage & Prenuptial Agreement Ontario | Toronto

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.

1. What Is a Prenuptial Agreement?

A prenuptial agreement  or premarital agreement is a written agreement two members of a couple enter into before they marry. It spells out how assets will be divided in the event of a divorce.

For years, prenuptial agreements got a bad rap. Many people thought that if you signed a prenuptial agreement, you were dooming the marriage to failure before it even began.

Another misconception is that prenuptial agreements are only for the wealthy. Yes, many wealthy people enter into prenuptial agreements, but they do so because it’s a smart move. Prenuptial agreements can help you protect your property and other assets.

2. Benefits of a Prenuptial Agreement

Prenuptial Agreements provide legal and financial protection in the event that a marriage is terminated and the parties separate. It provides how the parties wish to resolve their differences if there is a breakdown in the marriage. The Agreement can protect assets and separate property that you bring into the marriage and do not intend to share in the increase in value of same with your spouse.

A frank discussion about a couple’s financial future is required for drafting a Premarital Agreement. It is necessary for the parties to disclose all of their respective financial assets and liabilities and express concerns about their finances and how they wish to deal with their finances in the future.

3. Prenuptial Agreement In Ontario For A Matrimonial Home

3.1 Preparing a Marriage Contract

It is key to understand that the prenup does not exclusively deal with a relationship breakdown. The contract can also detail how certain assets will be treated, or even what roles and responsibilities each spouse will have during the life of the relationship. For example, one partner might have an asset that requires an annual investment of money to maintain. The couple could agree the asset is exempt from their shared marital property as long as the annual costs come from that partner’s income. The marriage contract can also act as part of a will because it discusses how marital property is to be treated.

As long as the contract is properly prepared, it gives the spouses control over and certainty about their future. To be properly prepared, the contract must be in writing, signed by both people, the signatures must be witnessed, and there must be full disclosure from both parties. It is wise to have separate lawyers—one for each party—review the contract before signing to ensure each person’s interests have been represented and the terms are legally sound.

The contract can be signed either before or after a couple gets married. Some of the terms of the contract can include how to treat the assets each person brings into the marriage and how to divide property the couple accumulates while married. Spousal support can also be decided at this time.

3.2 The Marital Home and a Prenup

One asset that is treated differently under the Family Law Act of Ontario is the marital home. There are certain legal rights under the act that a prenup cannot change.

The Family Law Act considers the matrimonial home the place where spouses live during their marriage. It is possible to own more than one matrimonial home, such as a primary residence and a cottage. The Act grants both spouses equal rights to live in and possess the matrimonial home as well as the right to share in the value of the home.

These rights to property are in place regardless of which spouse holds the legal title to the property or who owned the house prior to the marriage. That means if one spouse owned the matrimonial home before the marriage, in the event of a separation, he or she cannot prevent the other partner from entering the home without a court order. It also means, during the marriage, neither spouse can dispose of or mortgage it without the consent of the other.

A prenuptial agreement cannot affect a spouse’s equal right to possession of the matrimonial home. The only things that can affect a spouse’s equal right to the home are a separation agreement, divorce, or court order.

3.3 Net Family Property and the Matrimonial Home

In the event of a separation, property is divided according to the Net Family Property calculation. This is a simple formula in which each spouse subtracts their net worth at the date of marriage from their net worth at the date of separation. The difference is each spouse’s Net Family Property.

The lower Net Family Property is then deducted from the higher Net Family Property and the difference is split in half. The spouse with the higher Net Family Property then pays this difference to the spouse with the lower Net Family Property. The payment is called an “equalization payment” because in the value of each spouse’s assets will be equal.

It’s important to note that certain assets are exempt from this calculation and are considered “excluded property.” This means one spouse does not have to include the assets’ value when figuring out assets either at the beginning or end of the marriage. For example, gifts and inheritances may be excluded property.

The matrimonial home is not considered excluded property, but it is also treated differently because of the right to possession. If the home was owned by one spouse prior to marriage but is where the couple resides during the marriage, the owner cannot deduct its value as of the date of marriage from his or her NFP. Instead, the owner spouse must share the full value of the matrimonial home at the date of separation. This is also true even if the home was a gift or inherited.

4. How Long Does A Prenuptial Agreement Last?

4.1 Purpose of a Prenup

Often couples hesitate to consider the benefits of a prenuptial agreement because they think it’s unromantic. However, under the law, a marriage is an economic partnership, and spouses have rights and obligations.

Thinking about your marriage breaking down is probably the last thing you want to do during the excitement of preparing for it. On the other hand, it also makes sense for you and your future spouse to think about these things when you are on the best possible terms. If you wait until the marriage is breaking down, it will be much harder to negotiate.

In addition, prenuptial agreements can also be used to determine provisions for the surviving spouse upon one spouse’s death.

A prenuptial agreement lasts until you and your spouse agree to change it, unless the agreement specifies a date at which it ceases to be valid. If you and your spouse cannot negotiate the changes, you will have to get help from the court.

4.2 Changing a Prenuptial Agreement

One of the greatest difficulties in creating a prenuptial agreement is the inability to predict the future. This is ironic given that marriage contracts are supposed to take some of the uncertainty out of the future. When preparing a marriage contract, however, you may want to take into account that feelings and circumstances can change. Even though you want to remove uncertainty from your future, you must also allow for uncertainty. Otherwise your agreement may not represent your interests at the time of the marriage’s end.

Every now and then you and your spouse may want to revisit, review and update your prenuptial agreement. You can also allow for change within the agreement by using “sunset clauses.” A sunset clause stipulates that the contract will require revision or cease to be valid at a specific date.

4.3 Setting Aside a Prenuptial Agreement

A prenup will not serve its purpose if it is not valid and enforceable. It is advisable to seek legal help when preparing the agreement. If the agreement is not valid and enforceable, all or part of it can be set aside by a court.

A few things that prenups cannot do:

• Address child custody or access, or make any arrangements that the court deems not in the best interests of the child or children.
• Require a spouse to leave the matrimonial home.
• Waive a spouse’s entitlement to full financial disclosure.

In addition, under the Family Law Act, these conditions must be met for the marriage contract to be valid:

• Full financial disclosure by both parties.
• Understanding of the contract and its consequences by both parties.
• Voluntary entrance into the contract by both parties (i.e. no fraud, duress, undue influence or unconscionability)

It is advisable to think long and hard and seek independent legal advice when creating a prenuptial agreement. If you and your future spouse each have your own lawyer to help you with the process, there is a much greater chance that the contract will be enforceable. The point of having a prenuptial agreement is to reduce uncertainty and avoid adding to the stress of a marriage breakdown. This can only happen if it is prepared correctly in the first place.

Why You Need a Family Law Lawyer to Draft a Prenuptial Agreement

While there may be “do-it-yourself” Prenuptial Agreement forms available online, drafting a Prenuptial Agreement that truly meets the needs of you and your partner should be done by an experienced family law lawyer.

Is using an online prenup template a good idea?

Online prenup templates are not able to foster the same discussions or raise your awareness of issues or Ontario Family Law nuances that a lawyer can. In the event of Divorce, the terms laid out in these Prenuptial Agreement forms may be difficult to enforce because of the absence of independent legal advice and financial disclosure.

We Can Help You With  Prenuptial Agreements in Ontario

To fully prepare yourself for married life and any future that may lead to, consult the Family Law Lawyers at Fine & Associates Professional Corporation in Toronto. We have over 20 years of experience helping clients wisely enter into marriage with Prenuptial Agreements based on our knowledge of Ontario Family Law and our experience with Divorce cases.

For help drafting a Prenuptial or Marriage Agreement, contact Fine & Associate Professional Corporation.