Marriage is a form of legal and financial partnership between two spouses. Like partners in a business, married couples need to make joint decisions, manage finances, and regularly communicate about relevant issues.
No one enters into a marriage and expects to end it in divorce. But with the reality of divorce statistics, it won’t hurt to be prepared. The percentage of divorces in Canada has been declining for many years. Specifically, the decrease was most apparent in Ontario, which had 36% fewer divorces in 2020.
Before entering into marriage, partners should set the legal terms of the relationship and specify their rights and responsibilities. This is where prenuptial agreements come into play.
What is a prenuptial agreement in Canada? It’s a domestic contract that spouses sign before the wedding. In a divorce, a prenuptial agreement will serve as a roadmap for settling a couple’s affairs.
If you sign a prenup and get a divorce, what happens? It will protect you and your spouse, particularly in terms of financial interests and distribution of assets. This will further minimize any unexpected financial consequences when the marriage ends.
Despite declining divorce rates, protecting your legal rights from the onset with marriage contract lawyers is a good idea. Various reasons can motivate partners in Alberta, British Columbia, Ontario and any provinces in Canada to sign a prenuptial agreement.
For starters, an online prenup agreement in Ontario is a great way to create a legal relationship with your future spouse. Learn how it works and what factors you need to consider before entering a prenuptial agreement in Ontario.
| Key Takeaways There are numerous reasons why a marriage ends in divorce. But significant financial problems and disagreements are on top of the list. With a prenuptial agreement, spouses can help prevent future over money, property and other assets in a divorce. Prenups can be powerful tools to start a successful long-term marriage if discussed and crafted correctly. |
Prenuptial Agreement vs. Marriage Contract
In Canada, prenuptial agreements are more commonly known as domestic or marriage contracts. Under Section 52 of Ontario’s Family Law Act, a marriage contract is a voluntary agreement between two individuals. The parties may be planning to marry or are already married to each other.
Spouses most often enter into this type of written agreement before marriage. When spouses sign a marriage contract before marriage, the common term is a prenuptial agreement.
What does a prenup do? It spells out the handling of certain rights, obligations and other matters in separation, divorce or death. Spouses can also create a similar document after marriage through a postnuptial agreement in Ontario.
Although postnuptial agreements do the same thing as prenups, there are some downsides. One is that distinguishing between marital and nonmarital assets becomes more complicated after marriage. Postnups are also subject to greater scrutiny by the courts, making them more challenging to enforce.
Couples who are in a common-law relationship may also enter into a similar contract called a cohabitation agreement. The definition of common-law partners in Canada is two individuals continuously living together for at least one year.
A cohabitation agreement allows unmarried couples who intend to live together to set out rules if separation happens. The cohabitation agreement evolves into a marriage contract if the common-law partners decide to marry each other.
Why should you sign a prenuptial agreement?
Married couples may face numerous disagreements, but financial concerns are among the most common ones. Partners have different beliefs about money, causing conflicts over financial decisions.
Additionally, one person may be holding more significant assets or debts than the other before marriage. With a prenuptial agreement, each spouse can have more financial security. The domestic contract also prepares couples and saves them emotional and financial stress when the marriage ends.
Divorce and separation are likely not on your mind when getting married. Prenuptial agreements are not the most romantic subject to discuss with your future spouse. But there’s nothing wrong with wanting to protect yourself in these situations by signing a prenup. Below are the following benefits of prenups.
Protect personal and business assets
Many couples already own personal and business assets when they get married. They may include family businesses, heirlooms, inheritances, retirement funds, and investment accounts. Assets owned before marriage are premarital property.
Your fundamental rights over your premarital assets don’t change even if you enter marriage. They’re not automatically subject to distribution in the event of a divorce. However, if you’re not careful, premarital assets can turn into marital property.
That usually happens when one spouse uses the premarital property to make investments or pay off debts during the marriage. Unless you have a well-drafted prenuptial agreement, this can put your personal and business assets at risk in a divorce.
Signing a prenup agreement provides legal protection over assets you acquired before marriage. It establishes the rights and obligations of each spouse regarding separate and marital assets. You can specify what assets you want to keep and protect when the marriage ends in your prenup.
Address liabilities or debt obligations
Along with accumulated assets, partners may bring massive debt into the marriage. They might be paying credit card debts, student loans, or child support. Perhaps, they’re starting a new business or simply losing control of their spending.
If you’re the less-burdened partner, you probably don’t want to have to pay off creditors. You can use a prenuptial agreement to address any debt obligations you and your future spouse incurred before or during the marriage.
With a prenup, you can define the premarital debt of each partner as separate and specify how they will be resolved. This will help limit one spouse’s exposure to the other’s debt in the event of divorce.
Settle potential alimony challenges
Alimony payments are designed to fix financial issues. But they can also lead to bigger problems when inadequately addressed in the prenup.
When one spouse earns significantly more than the other, the amount of financial support payable can be surprisingly high for most individuals.
With a prenup, married couples can stipulate a specific alimony amount or even waive it. Prenuptial agreement adds structure to alimony. It eliminates the need to ask a judge to settle potential alimony issues when the marriage ends.
Besides waiving the right to receive maintenance or specifying a certain amount, the parties may also place conditions in the prenup. For example, the prenuptial agreement may terminate the right to alimony if a spouse commits infidelity.
Secures children in the process
A prenuptial agreement is also beneficial, particularly when you have children from a previous relationship.
You can include specific provisions in the prenup that will protect children during the marriage and in the event of divorce. There may be particular assets that you want to preserve for children from your first marriage.
Without a prenup, the surviving spouse may assume most of them, leaving less than what you wish your children to have. A prenuptial agreement can ensure that they will inherit all or a portion of your assets.
What can a prenuptial agreement cover?
A prenup in Canada is a legal document that outlines an agreement between a married couple concerning their rights and obligations. But what issues or provisions go into a prenuptial agreement? A prenup can protect almost anything of value.
Working with a marriage lawyer in Toronto and other cities in Toronto is an excellent step. It can help ensure all essential matters are discussed and written in compliance with Ontario’s Family Law Act. When entering a prenuptial agreement, you and your future spouse can include the following stipulations.
Ownership or divisions of property
One of the issues married couples deal with in divorce or separation is determining how to divide their assets. Division of property can be complex, but a family lawyer can help you explore your options.
Without a marriage contract or prenuptial agreement, their property will generally be allocated based on the laws of Ontario. Married couples are automatically entitled to an equalization of net family property or equal rights of the profits of their marriage. The end of a marriage or the death of a spouse sets off the right to equalization.
That means if you don’t have a prenup, you must split all property acquired during the marriage equally. The reason for divorce does not matter. The same applies to the increase in value of any property spouses owned before getting married.
The good news is that each spouse could protect significant assets they brought into or earned separately during the marriage. Through a prenuptial agreement, married couples can decide the handling of their property.
Spousal support obligations
A non-earning spouse may seek spousal support to live independently in the event of divorce. A court will typically examine numerous factors when awarding spousal support to the potential receiving spouse.
Some people hesitate to sign a prenup because they believe its primary purpose is to avoid alimony. But without a prenuptial agreement, spouses will only rely on default state laws when their marriage ends. In most cases, this can lead to a long and frustrating court battle.
Having a prenup allows married couples to choose the terms for spousal support obligations freely. They can agree on a predefined alimony amount and what conditions to seek spousal support when separating or to break up.
Contrary to what others believe, a prenuptial agreement can help guarantee the right to spousal sport in the event of divorce. This will give married couples more peace of mind as they enter the marriage.
Provisions for the education and moral training of their children
A prenup in Ontario, Canada, doesn’t only protect both spouses. It can also provide legal protection for your children. If you or your spouse don’t yet have children, you can include specific provisions for them in the prenuptial agreement.
Specifically, a prenuptial agreement allows married couples to plan how any existing or future children will be brought up morally and educationally. You and your spouse can agree on the following specifications in your prenup.
- Specific schools and subjects will your children study
- Values, beliefs, cultural practices or religion
- The amount you plan to contribute to your children’s education funds
Any other matter in settlement of the spouses’ affairs
A prenuptial agreement can also cover expectations concerning your marital responsibilities. Note that you may not include non-financial duties like who will be responsible for taking out the trash every week. But you can have the following specifications in your prenup:
- Who will pay the bills and file tax returns
- How your joint and personal bank accounts will be handled
- How to obtain credit or spend money
- Who will be a stay-at-home parent when you have children
What may not be in a prenup agreement?
A premarital agreement can protect almost anything the spouses agreed upon as long as the law does not prohibit it. Like other provinces, Ontario has limitations on what spouses can include in a prenuptial agreement.
The Family Law Act does not allow the following issues in a marriage contract or prenup in Canada.
Child custody or access
A prenuptial agreement cannot cover most parenting issues, particularly child custody or access decisions. This is because the legal test for custodial arrangements centres on the best interests of the child during the breakup.
The court always retains the power to decide what’s in the child’s best interest. It may disregard any provision of the marriage contract relating to child custody or access.
Rights to the matrimonial home
Section 17 of the Family Law Act governs the rights of married couples to matrimonial home. But as per Section 52.2, any provision in a prenuptial agreement cannot affect the equal rights of each spouse to live and possess the matrimonial home. This also includes the right to share in the home’s value.
Married couples will retain equal rights to remain in the home even if the property is under one spouse’s name. Unless there’s a court order or separation agreement, they cannot prevent the other partner from entering the matrimonial home.
Provisions considered anything illegal or immoral
No province or territory in Canada allows illegal or immoral provisions in your prenuptial agreement. This means your prenup cannot override or invalidate any statutes. They should not include anything that requires you or your spouse to commit illegal actions.
The court will reject any such provisions outright, which may result in the prenup document or a portion of it being set aside. To prevent this from happening, get the help of a family lawyer when drafting your prenuptial agreement. This will ensure that all the contract terms comply with statutes at all levels.
Myths and Facts About Prenuptial Agreements
There are numerous misconceptions surrounding prenuptial agreements. Because it is often an uncomfortable subject for many couples, many tend to avoid bringing it up. Some may be hesitant to sign this agreement because of its negative connotations.
However, it is essential to be informed and understand what a marriage contract or prenup can do for you. Do you have doubts about entering into a prenuptial agreement in Ontario before marriage?
Below are some myths you and your future spouse should know about a prenup and the facts.
Only wealthy people should have a prenup
The prevalent idea is that only wealthy people should have a prenuptial agreement. Although prenups deal with financial issues, it doesn’t mean that only the rich and famous can benefit from them.
Couples should get into a prenup, regardless of income level. You and your spouse may have a low income when you get married but may acquire wealth over time.
A prenuptial agreement is an excellent way to protect your current and future earning potential when the marriage ends. The agreement will specify the allotment of any assets and financial interests you acquire during the marriage.
Prenups indicate a lack of trust or confidence
Many believe that prenuptial agreements indicate a lack of trust or confidence in the relationship and their partners. Because of this belief, couples tend to avoid discussing their assets and financial interests before marriage.
But not discussing these crucial issues before marriage is a mistake. It can eventually cause massive conflict during and after the marriage. Meanwhile, arranging for a prenup and having an honest discussion about each other’s finances can build trust and peace of mind.
Prenups only matter in the event of a divorce
Most prenups stipulate what will happen to your assets and debts if you get a divorce. But it’s worth noting that prenups don’t only prepare each spouse for divorce or separation.
It also provides legal protection in case of incapacity or death. You can include provisions on the disposition of your assets if one partner dies or becomes incapacitated. Spouses can set out their wishes for their assets and finances, which is helpful in estate planning.
Additionally, married couples can use prenups to determine their financial expectations during the marriage. They can agree on how they will spend their earnings through the relationship. This will help create transparency for a successful marriage.
Can a prenuptial agreement be set aside in Ontario, Canada?
Section 56.4 of the Family Law Act permits a court to disregard a prenuptial agreement in part or whole under specific conditions. Get legal advice when creating the contract to ensure your prenup is valid and enforceable.
Below are the grounds that a marriage contract can be set aside in Ontario, Canada.
Failure to disclose significant assets and debts
Full financial disclosure of significant assets and debts is crucial when entering a prenuptial agreement. When contracting, each spouse must properly show a list of their assets, obligations and other liabilities.
Failure to make financial disclosure opens the door to allow the court to set aside your marriage contract. Note that a judge will consider whether both parties have been informed of all assets and liabilities.
Ensure not to leave anything in your financial schedule or risk putting yourself in a vulnerable position. Suppose the judge decides to disregard your entire prenuptial agreement. In that case, the assets that should be under protection may suddenly be up for debate.
One of the parties doesn’t understand the agreement
Both spouses must comprehend the implications and consequences of the prenuptial agreement. If one of the parties doesn’t understand what they’re going into, the court may set the contract aside.
It would help to sign the prenup in advance. This will signify that both parties had enough time to thoroughly grasp the terms and ramifications of the agreement. A lawyer can argue undue influence if the domestic contract is signed hours before the marriage.
Does not comply with the law of contract
Every aspect of the prenuptial agreement must consider fairness and comply with contract law. If the judge finds one unfair provision, they may be more likely to set aside the contract or the specific term. It’s crucial to seek experienced legal advice to review your prenuptial agreement.
If you believe your prenup must be void, you should ask an appropriate court to set the contract aside. But note that courts will only get involved if one of the grounds mentioned above is present.
| Did you know? A whopping 40% of marriages end in divorce, but only 8% of Canadian couples signed a prenuptial agreement before getting married. |
Seek Legal Advice for Prenuptial Agreements at Nussbaum Family Law
Using online prenuptial agreement templates can be tempting because of their lower costs, but they are extremely risky. Remember that a judge can set aside your contract if it violates Ontario’s Family Law Act.
Additionally, you’ll need a lawyer to issue an Independent Legal Advice Certificate. Without it, your prenuptial agreement will be invalid.
The Nussbaum Family Law protects your rights with a well-drafted marriage contract. Get in touch with one of our family lawyers today for a free consultation.
Protect your legal rights with a family lawyer. Contact Nussbaum Family Law now for the best legal assistance.
FAQs on Prenuptial Agreements in Ontario
How much is a prenup in Canada?
Prenup cost can vary, depending on several factors, such as the case’s complexity, legal fee arrangements and the lawyer’s experience. But typically, couples can expect to pay between $1,000 and $10,000 for a prenuptial agreement.
How long do prenups last in Ontario, Canada?
A prenup will last indefinitely unless you and your spouse agree to change it or a clause specifies a termination date.
Can you sign a prenup after marriage?
Technically, a prenuptial agreement is a contract signed before getting married. However, you can enter into a postnuptial agreement, which is the same thing, except you draft and sign it after the wedding.
