April 12th, 2024

Whether you have few assets or a lot, pre-nups can help prevent messy divorces

By Nina Dragicevic, The Canadian Press on March 19, 2024.

Mark G. Perry, founder and family lawyer at Westside Family Law in Vancouver is shown in a handout photo. The best case scenario with a prenuptial agreement is that you never even use it. But there are too many other scenarios to ignore — and a prenup would’ve been helpful in many. THE CANADIAN PRESS/HO

The best-case scenario with a pre-nuptial agreement is that you never need to use it. But there are too many other scenarios to ignore – ones for which a pre-nup would’ve been helpful.

Even for younger couples who might not have acquired significant assets yet, there are still reasons to get one.

Younger generations stand to inherit enormous wealth from property-rich baby boomers, and that financial windfall can be a sticking point later on. In fact, when parents come in with their adult children to discuss inheritances, often pre-nups are a part of the deal, says Roselyn Pecus, managing lawyer at Roselyn T. Pecus Family Law Office in Vaughan, Ont.

“I have a client now who took a huge inheritance that she received from her parent and put it into the matrimonial home – never thinking that anything would happen to her marriage,” Pecus said.

“I think people think of it as: “˜I’m protecting what I bring into the marriage.’ But I think what’s really interesting is what you can protect during the marriage.”

If that client had kept the cash, it would have been “protected as an exclusion at the time of the separation,” Pecus explained. But many people love paying off their mortgage with an inheritance, she added, not realizing the legal implications if their spouse became an ex.

Some people sign marriage contracts – another term for pre-nups – specifically because of these financial windfalls, Pecus added.

Having children is another major event with lifelong impacts and financial repercussions, said Mark G. Perry, founder and family lawyer at Westside Family Law in Vancouver.

“Children have this capacity to change everything,” Perry said. That may include one spouse becoming a stay-at-home parent either temporarily or permanently to care for children, or daycare costs if both are working full-time.

If one person sacrifices their career for the unpaid labour of child-rearing, spousal support will be a key detail in divorce proceedings – a pre-nup will give that process some predictability, Perry said.

Pre-nups can also protect growth on assets, whether it’s property or investment accounts, he added. If one person is lucky enough to bring a home into the marriage, and the marriage lasts 10 years, the value of that property has likely shot up dramatically.

“Without a provision in a pre-nup addressing the increase in value, [an ex-spouse] would be able to say, “˜I’m entitled to 50 per cent of the increase in value,'” Perry said.

With a housing crisis and tight rental markets in many regions across the country, young couples may live together out of necessity, but living together reaches common law status within a few years.

Once you are common law or married, you are governed by provincial family laws, which vary across Canada, Perry said. In British Columbia, he added, common law partners “have all the same rights and responsibilities as a married couple.”

A cohabitation agreement – basically the same as a pre-nup, for unmarried couples – works in these instances.

These agreements can also include language that states the intention to marry in the future, Pecus said – and when that happens, the agreement will continue and serve as a marriage contract.

That can add another wrinkle: where are you getting divorced?

If a couple lived in Manitoba for many years, moved to B.C. for work, and then divorced – one legal dispute might involve determining whether it was a Manitoban case or a British Columbian one, Perry said. Usually property issues are dealt with provincially, so the current residence is the priority, but it adds complexity to the case.

If you don’t get a pre-nup or cohabitation agreement, any divorce or split will be left to provincial laws, Perry said, and you may end up paying lawyers to determine how those laws apply to your situation.

With a pre-nup, you’ve determined what outcome you both find fair before the emotional spiral of a relationship breakdown.

But it’s not easy to suggest to a partner, Pecus admitted. A marriage counsellor might help with the conversation. Or you can even throw your parents under the bus, she said, and say they’ve advised you to have a marriage contract drafted – especially if there’s an inheritance in your future.

The key detail is timing. Don’t ask for a contract one week or one month before your wedding, Pecus said. It couldbe challenged later if it’s done in a rush.

“So often, we’re running around at the last minute trying to get this done,” she said. “And it’s almost a reason to open up some marriage contracts, because it might be considered under duress when we’re doing it a week before, or a month before. So we want to get them done well in advance.”

This report by The Canadian Press was first published March 19, 2024.

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