BEFORE YOU SAY ‘I DO’ TO A MARRIAGE CONTRACT ...
Understand how laws will apply to your situation, writes Laurie H. Pawlitza.
Canadians may not be surprised to hear that family lawyers are lucky to get through the month of December without a “Christmas access motion,” in which a court is asked to decide where Timmy will spend his holiday as warring parents can’t agree.
But few are aware that the end of May heralds the beginning of another dramatic period in the family law calendar — “marriage contract season.”
Unfortunately, most couples choose the venue, the wedding dress and the flowers, before ever popping the most difficult question of all: “You’ll sign a marriage contract, right?”
The purpose of entering into a marriage contract or cohabitation agreement is to create a property and/or a support regime that is different than the law that applies on separation or death.
In order to create the appropriate regime, anyone contemplating a contract, must first understand how the law would apply.
The way in which family property is divided after a separation, and the minimum rights each spouse has with respect to the other’s estate if death occurs before a separation, depends on the province in which you reside. While the regimes differ, each province has in place property laws which set out how a married couple’s property is dealt with on separation or death.
Common reasons to have a contract include the situation where one spouse brings the home into the relationship, or if a spouse is gifted shares in a family business before marriage.
Second marriages, especially those in which there are still obligations to prior families, can also be problematic. And if a spouse’s parents want to gift money for the purchase of a new home for the couple, in Ontario at least, a contract is likely warranted.
In short, it’s important to know what will happen if you separate or if either of you die prior to any separation, before you marry or cohabit.
But knowing the law is not the end of it.
In addition to an early start to marriage contract discussions, if a spouse wants a valid marriage contract, there are a number of other requirements to be met.
Each spouse is obliged to provide full financial disclosure of her or his assets, debts and income well in advance of the contract being signed. A spouse has to understand the nature and consequences of the agreement they are signing — which has been interpreted as meaning that independent legal advice is required.
A contract can also be invalid if there is undue influence, duress or if the contract is so one-sided that it shocks the conscience of the court.
Most difficult of all, however, is the simple act of broaching the contract with the spouse-to-be.
Raising the issue of a contract is often emotionally fraught. Many say only three topics in society are off limits: death, sex and money.
Contracts almost always provoke a discussion of money and death. Even worse, they require that the doe-eyed couple also discuss a future separation.
Spouses asked to sign a contract are often startled and assume that being asked to sign a contract means that their intended does not trust them — or worse — that their partner already has one foot out of the relationship.
Contracts require a party to discuss future plans and the expectations each spouse has of the other: Do they want to share the value of the house if one of them contributed much more to it than the other did? What will happen if they separate after one of the spouses stayed home to look after the children? What if they are together for five years? Does the answer change if they are together 25 years?
And of course, a spouse’s extended family often tries to dictate the terms of a contract — especially when the parents or siblings are in a family business together. What happens when a spouse takes his family’s side about the contract terms and does not support his wife-to-be?
During the discussions about a contract, one spouse may well find out things about the partner, or her or his family that are surprising or even disheartening. Couples occasionally call off a wedding because their differing expectations of a fair contract cannot be reconciled.
Of course, family lawyers have their share of war stories about last-minute negotiations and wedding cancellations. One that still circulates involves a bride, in the vestibule of her church, weeping under her veil. The guests were seated. She was signing the contract her husband insisted she sign — or the wedding would be off. Her family lawyer stood beside her, still advising her not to sign.
Contracts that change the legal rights of a couple at the outset of their relationship require thoughtful and honest discussion, good advice — and most of all — plenty of advance planning.
Common reasons to have a contract include the situation where one spouse brings the home into the relationship, or if a spouse is gifted shares in a family business before marriage.