What is more romantic than giving your future spouse certainty about how you intend to divide your assets and debts upon separation (if irreconcilable differences crop up) before tying the knot? NOTHING. Adrianna Banaszek of Banaszek Family Law explains what prenuptial agreements are, and why they are becoming increasingly popular, especially among millennials.
Popular culture has depicted prenups as something the financially-advantaged partner would want to propose in an effort to preserve their wealth. The once thorny subject is becoming less taboo as more people understand the nuances of entering into a private agreement that governs your relationship.
What is a ‘Prenup’?
A Prenuptial Agreement (“prenup”) is a contract between two future spouses that settles issues of property and debt division, spousal support, or any other matters you wish to make crystal clear in the event of a party’s death or divorce. Entering into a prenup provides parties the opportunity to plan for the unthinkable, which is often difficult but very important. Having a binding plan in the event of a divorce, usually saves spouses money because their matters are already decided and do not need to be mediated or litigated. Plus, it’s much easier for most couples to make clear and fair decisions during the “honeymoon phase” instead of when they are questioning why they decided to walk down the aisle to Ben E. King’s Stand by Me in the first place.
If you do not enter into a prenup, you will be subject to the Divorce Act (Canada) and legislation of your jurisdiction. In Alberta, for the most part, assets and debts accumulated during the marriage will be divided equally, save for exemptions which may apply (like gifts, inheritances and windfalls). Just because you acquired an asset before you began your cohabitation or before marriage, does not mean it is exempt from division with your spouse. The increase in value of “pre-marriage assets” during the course of your marriage may be subject to equal division as well. If you do not want the legislation to automatically apply to your relationship if there is no agreement to settle matters amicably, entering into a prenup is a way of contracting out of this framework.
The Prenup Process
Bringing up your desire to enter into a prenup or a cohabitation agreement to your partner may be difficult. Some people relate entering into a marriage contract as a sign of distrust, a way of jinxing the relationship, or extinguishing the passion. It may be beneficial to book an initial consultation with a family lawyer before discussing the matter with your partner so that you have an overview of the laws affecting you while you are not covered by a prenup. If your partner is already on board with entering into a marriage agreement, take note that at Banaszek Family Law, we will only meet with one party to the agreement to protect your interests and to reduce the chances of the agreement being overturned.
Financial Disclosure Exchange
The exchange of complete financial disclosure between the parties to the agreement is part of the drafting process and one way of ensuring that the agreement is not overturned in the future. Sharing details about your assets (savings, property ownership) and debts/financial obligations (student and credit card debts, lines of credit, leases) with the person you intend to spend the rest of your life with puts both parties on an equal “knowledge” playing field. When each party’s financial picture is laid out on the table, the agreement to be entered into becomes more equitable. It also gives each party more information about one another so that when they make the legal decision to marry, they know what they are signing up for.
Independent Legal Advice
Once the agreement is drafted by our office and both parties have had the opportunity to review and approve its’ contents, each party should (read: must) obtain independent legal advice before entering into the agreement. This will require that your partner attends at a separate law firm and meets with a different lawyer to receive legal advice on the agreement and have their signature witnessed. Obtaining independent legal advice will help ensure that the agreement is not subject to being overturned because one party did not receive the full advantage of legal advice. Obtaining independent legal advice also significantly reduces the possibility that one party can overturn the agreement in the future by claiming that they entered into the agreement under duress or that they did not understand the legal impact of certain clauses of the agreement.
Prenups for the People
Prenups are no longer reserved for the famous and wealthy. Although pop culture often depicts prenups as a preservation tool for the rich party, the less wealthy spouse may also be protected under the agreement with the inclusion of clauses that benefit their position (often upon receiving independent legal advice on the agreement).
With common law relationships on the rise in Canada and Canadians waiting longer to get married, more spouses are bringing assets (and debts) into marriages rather than accumulating them all together as was the case in the past. Career and financial stability have become priorities before marriage for Canadian millennials (Cardus Family study, August 2016), which in turn increases the need for prenups. There is a cost/benefit analysis which needs to be undertaken in advance of entering into a prenup, and usually the benefit outweighs the cost because there is so much uncertainty in the future and many people want to keep what they worked hard to accumulate. Prenups are now, more than ever, for all people!
It is very difficult to plan for all of the variables that may form part of your life and marriage. Although your marriage agreement can take many possibilities into account, there is always room for making changes to the agreement if it is by agreement of both parties and will be solidified with independent legal advice. It is often beneficial to reevaluate and update your marriage contract before or after big life changes, such as a change of career of one or both of the spouses, or a shift in the family dynamic (for example, the addition of children into the picture and shifts in caregiver roles).
You are NOT precluded from entering into a marriage agreement if you are already married. Spouses may enter into a post-nuptial agreement (“postnup”) if they are in agreement about the terms following their “I Do’s”. The risk you run into with waiting to see how your spouse feels about entering into an agreement after the wedding date is the potential for rejection. If you do not enter into a prenup before the marriage is solemnized, and if your spouse does not consent to enter into a postnup, the Divorce Act (Canada) and legislation in your jurisdiction will apply if you separate.
Banaszek Family Law offers flat rates for uncontested family law agreements, including: prenuptial, postnuptial, and cohabitation agreements. Make the next move by scheduling your initial consultation with Adrianna Banaszek today, HERE ●