Toronto Star

Navigating through the world of prenuptial­s

Marriage, cohabitati­on contracts can be good investment­s

- ALEKSANDRA SAGAN

A romantic proposal or an invitation to move in with a partner may seem like an awkward time to start planning for a smooth divorce. But with nearly half of Canadian marriages ending before death does couples part, a pre-nup can help individual­s emerge from breakups financiall­y unscathed.

Slightly more than 43 per cent of couples married in 2008 will divorce before reaching their 50th anniversar­y, according to Statistics Canada, which stopped providing informatio­n on the country’s divorce rate after that year.

“Why wouldn’t we do some advance planning?” asks Michael G. Cochrane, a partner at Brauti Thorning Zibarras in Toronto, and author of Surviving Your Divorce: A Guide to Canadian Family Law.

Marriage agreements are called prenuptial­s if signed before the legal marriage ceremony.

Cohabitati­on agreements are for common-law couples who have lived together for at least a year. Both can protect each person’s financial situation if the relationsh­ip ends.

People with at least one asset they want to protect, like a house or a stake in a business, should consider such agreements, said Nathalie Boutet, principal at Boutet Family Law in Toronto. Older individual­s entering their second marriage can feel compelled to protect anything salvaged from divorce No. 1 and not risk their children’s future inheritanc­e, Cochrane says.

Parents, meanwhile, often encourage — if not demand — their child secure a pre-nuptial if they’ve given money for a house down payment, he says. Couples may also want to consider how such a document could protect their future financial stability.

“Young people in particular enter marriage kind of blithely unaware,” says Cochrane.

They don’t necessaril­y consider how much their future income will be affected by time spent as a stay-athome parent, he says, and they can find themselves going through a divorce after their best earning years.

An agreement can leave certain real estate, other property, investment­s — even pets — out of future divorce negotiatio­ns. It can stipulate whether or not spousal support will be paid and, if so, how much.

Without an agreement, divorcing couples often leave it up to the legal system to determine who keeps what assets and what spousal support should be paid, says Cochrane. If the couple owns their primary home, he says its value is split evenly.

Common-law couples don’t have the same matrimonia­l home protection in the law, he says, and property division for them is “a free-for-all.”

Everything contained in a marriage or cohabitati­on agreement is legally binding, so long as it meets criteria that vary by province, she says.

In Ontario, where Boutet practises, the contract must be fair to both parties. For example, it cannot deny a person spousal support if that would force them on to social assistance.

Each person must also disclose all their assets and liabilitie­s, and negotiatio­ns must be fair, which Boutet says is partly achieved by securing separate lawyers. Once written, couples can revisit negotiatio­ns.

Cochrane says for simple cases, couples can DIY a marriage contract — so long as it’s in writing and signed by the couple and witnesses.

Boutet says couples using a lawyer should budget between $3,000 and $4,000 for separate legal representa­tion and fees associated with financial disclosure, like property assessment­s. Very complex situations can cost up to $30,000, she says, adding that upfront cost is worth the potential future savings.

“If you look at how much it costs to divorce when there’s a big mess and a big fight, it is a very good investment,” says Boutet.

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