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What is a Prenup and Should I Get One?

Cohabitation agreement; marriage contract; prenuptial agreement; you may have heard all these phrases before, but what do they really mean? Which one is applicable to your situation?

Bottom line: They all mean the same thing but in a different context.

A prenuptial agreement or marriage contract is a type of contract that is drafted for people in anticipation of marriage or who are already married and are looking to protect their respective assets and other interests.

A cohabitation agreement is also a contract between two people, however, it applies to those who live in a common law relationship.

What all of these agreements have in common is the fact that they are legally binding contracts - entering into one is not something to take lightly as it is not easily reversible. You have to be sure that this is something you and your partner agree to fully and that each party fully understands each and every word in that document. You should always consult a lawyer if you are considering entering into such agreement. Our office will educate you about the process of negotiating the agreement, the family law issues arising out of your unique set of circumstances, and will draft such agreement for you.

Now let's revisit the question, should you get a marriage contract? You may have heard some people say that this is "bad luck" for the relationship, or that entering into one means that you doubt the stability of your relationship or your relationship is "deemed to fail".

Our perspective is that these contracts are only applicable to you and your spouse in the event that you separate. It's like having a life jacket when going boating. It's there for safety in case the worst happens, however, it doesn't mean you have to wear a life jacket during your whole boating experience. When enjoying yourself on the boat, you may not even remember the life jacket is there, but in the event of an emergency, you'll be glad you brought it with you.

Now, you're probably wondering what goes into one of these contracts. This answer varies from couple to couple, as it is personal and unique in each relationship.

Depending on what you and your spouse owns going into the relationship, (e.g. RRSPs, TFSAs, savings accounts, a house, cottage, a car) you may want to protect your assets that you brought into the relationship.

If, during the relationship, you acquire and own a property in your sole name, you may also want to hold on to it should you ever separate from your spouse. Therefore, you exclude your assets from sharing by way of the agreement, otherwise, these assets may be subject to division (even if you acquired them prior to meeting your spouse, e.g. a house that becomes your matrimonial home, the home where you both reside).

One of the more controversial issues at the time of separation is spousal support. Many spouses struggle with this issue at the time of separation and have strong feelings about it. When negotiating an agreement, a couple may agree to include a "release" of spousal support in the marriage contract stating that in case of separation, neither spouse will pursue spousal support from the other.

On the other hand, some couples wish to leave the issue of spousal support open, to be dealt with in accordance with the applicable legislation at the time of their separation. For example, imagine that over the course of a long-term marriage, you and your spouse mutually decided that you would significantly reduce or terminate your employment to dedicate more time to your children and assume the role of a homemaker. Should you separate, releasing spousal support may cause financial hardship and difficulty for you in those circumstances. For this reason, people should consider the weight behind waving spousal support at the time they are negotiating their prenuptial agreement, and should consider their future plans when making such decisions.

The purpose of entering into these agreements is to avoid fights and litigation should the unfortunate time of separation occur.

In essence, the beauty of entering into these types of agreements is that you and your spouse can mutually agree on all issues relating to separation long before separation. Otherwise, should you separate, you will need to follow all protocols and rules outlined in the Family Law Act and the Divorce Act, regardless of whether or not you find them fair and regardless of your state of mind and emotions at the time of separation. Separations are also much quicker, cleaner, and cheaper with marriage contracts since negotiations have already been made prior to the event, and the role of both parties during separation is to simply follow the contract they already signed.

If you're interested in learning more about marriage contracts/prenuptial agreements, contact our office today to setup a consultation! CLICK HERE to do so. Jolanta Bula B.A. (Hons.) J.D. #prenup #marraige #divorce

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