Prenuptial and Marriage Agreements
PRE-NUPTIAL AND MARRIAGE AGREEMENTS
Pre-Nuptial or Marriage Agreements are now permissible in Ontario since 1978. In the past only the Province of Quebec permitted such contracts. In Ontario, prior to this date, they were illegal as being against Public Policy.
The main purpose of having a prenuptial agreement or marriage agreement is to custom make the relationship without the application of the law which is Family Law Act for Ontario. IN such agreement, one can talk about not only how the parties will relate in marriage but also provide for support obligations, if any, and division of assets if parties separated.
An agreement can be made before marriage, or during marriage or for parties living together without marriage. For the last one it is called Cohabitation Agreement. When it is done as an agreement prior to marriage with the intention of getting married it is referred to as prenuptial agreement and when done after marriage it is referred to as the Marriage Agreement.
The advantage of having an agreement is that the parties do not need to go to court and have an acrimonious conflict if the marriage did not work out and such an agreement also provides guidelines for the conduct of the parties during marriage and prevents the conflict from arising by spelling out the expectations of the parties at the commencement of the relationship. With extremely high divorce rates in North America and very high legal costs of court hearings it is helpful to have such an agreement.
The following are some of the pertinent issues concerning such Agreement:
Matrimonial Home is the residence where husband and wife together reside as their family residence. Generally, both husband and wife have a right to the matrimonial home where they live and this right cannot be taken away.
Each spouse has an equal right to the possession of the Matrimonial Home whether it is owned solely by the Husband or the wife. Consent of the spouse is needed in Ontario if you wish to sell or mortgage the family home in Ontario.
Agreement can provide that during the marriage parties will have right to ownership of assets separately. Without such clause the Net Family Property consent of the Ontario Family Law Act will apply under which all the personal and business assets gathered during the marriage are shared equally. The right to own separate property does not preclude the parties agreeing to own assets jointly.
Where there are two professionals in the family and the husband or wife is a business person it is advantageous to keep the assets and liabilities separate. If one is a professional and such professional’s liability insurance does not cover all the damages under the malpractice insurance because of the upper limit of insurance coverage, the assets owned jointly can become subject to the judgment against the professional.
The separation provisions of a prenuptial or marriage agreement do not apply if the parties do not separate, but if they do, such an agreement can also provide how the assets will be divided. If the assets are kept separate during marriage the question of separating the assets would not arise. In the Ontario law the right to possession cannot be signed away because there may be a child and one parent may need to provide shelter for the child.
Support if parties separate
The agreement can make provision as to what support any spouse will provide to the other in the event of separation. If both are capable of earning good income the provision for support is not necessary and a clause can be written which would confirm that there would be no support provided in the event of separation. If one party does not have a good career, provisions can be made to provide support such dependant spouse for a time period to enable him or her to become self sufficient.
The advantage in having the support provision is that the parties do not need to go to court to resolve their differences if the marriage breaks down. A contested divorce in Ontario can cost thousands of dollars if an agreement is not made. If such agreement is not made the Family Law Reform Act of Ontario would apply and court would be asked to determine Support obligations of the married spouse based on the criteria set out in Act which essentially requires the party to provide support according to the ability of that party to provide support and need for the other to have support.
If the agreement is not made and the parties are not married the obligation to support arises after three years if there is a relationship of dependence. If the parties are married the obligation to support arises immediately from the marriage unless there is a marriage agreement which does not provide for support.
Issues of custody and access cannot be provided for in Ontario in a marriage contract but can be provided for in a separation agreement.
It is not required but parties can spell out the religion that the family or each spouse or children will follow. If any party is religious in the marriage this can be an important issue for that spouse.
In an agreement of this type it is important to bring out any issue that either party feels is important in the marriage relationship. For example, whether parties will live abroad or not can be addressed. If parties want in advance to send children to specific types of schools, that should also be mentioned. If a spouse enters the marriage with large debts the spouses should address the question of who is responsible for such debt. Subjects that can be written into the agreement are not limited.
Amendments to Agreement
It is not possible to fully foresee each eventuality or predict the future as each person may change. It is therefore important to review the agreement every few years or if there is a substantial change in the family circumstances the agreement should be reviewed.
Why an Agreement?
The agreement appears to go against the notion of romantic marriage. However, the grim statistics of separation, which is about 50% plus of marriages in North America, the agreement seems to be an answer to the high emotional and financial cost of separating. If parties use the adversarial system for resolving their differences the losses far outweigh the advantages of an agreement.
The agreement is particularly helpful where there is a second marriage and children from previous marriages or a marriage where the differences in wealth between the spouses is greater or where risks of divorce is higher or where the parties know what they want and are prepared to spell it out.
Formalities of Agreement
A Pre-Nuptial Agreement or a Marriage agreement should be signed in the presence of a witness and before a lawyer to ensure that the parties are signing it with full understanding and voluntarily and have made full disclosure to the other of their financial position.
It is not desirable to prepare the prenuptial agreement too close to the date of the marriage because the subject matters discussed in the agreement do not help the romantic atmosphere of the marriage ceremony. The sensitivity of the parties can result in the marriage being called off or postponed.
It is better for the terms of the agreement to be agreed between the parties and one lawyer can draft the agreement for the other spouse to review and the other spouse should obtain independent legal advice which should be recorded in the form of a statement or affidavit.
An agreement can only address issues during the lifetime of the spouses. If one of the two dies the estate of the deceased is bound by the terms of the agreement. However, the agreement cannot address issues of how the assets are to be divided in the event of death. Wills should be prepared by the spouses after marriage usually appointing the other spouse as the beneficiary. It is important for the spouses or relatives to disclose the terms of the will and advise the executor as to where the original will is located.
The lawyers fees would depend on the time needed by the lawyer preparing the agreement who must meet and take instructions draft the agreement, and explain the agreement to one spouse and prepare the statement confirming his advising one spouse. The fees of the lawyer providing independent legal advice would be separate. Where there are negotiations necessary the fees will be based on time.