We often hear about prenuptial agreements in the context of celebrity unions or marriages of the ultra-rich and powerful. So, if you and your intended spouse are average Canadians, should you sign a prenup? Isn’t that just a sure way to kill the romance of a new relationship?
First of all, although prenuptial agreements are most often created in situations where one or both of the spouses has married before or has significant wealth, that’s not always the case. Remember that your financial and family situation might look very different at the time of your union compared with 20 or more years down the line.
There is no denying that it can be tricky to have a conversation about what will happen should you and your future spouse split up after marrying. But the “what if” discussion can set out clear expectations at a time that isn’t clouded by the potential conflict that comes with separation. In the same way that couples should talk about their futures regarding financial goals or whether to have children, discussing the possibility of separating makes sense from a practical perspective. In fact, creating a marriage contract before you tie the knot can help sort out issues you might not even be aware exist.
The benefits of a prenup
A prenuptial agreement (or a cohabitation agreement for couples living together without marriage) allows you to set up specific rules for how you will manage your separation should it occur rather than negotiating those matters after the fact.
Property division
When couples split, the value of each party’s assets and debts are calculated as of the date of separation for the purpose of family property division. In Manitoba, a prenuptial agreement allows you to stray from that property division formula to a more customized one based upon what you and your spouse believe to be more equitable under the circumstances.
Spousal support
Prenuptial agreements can also cover spousal support. While this use is more common for people entering second marriages or relationships, it is something to consider at any stage. What are your relationship plans? Does one of you plan to work while the other does not? What if someone (god forbid) gets sick? The law can and will deal with all these issues, but you might have an arrangement in mind that you think is more appropriate.
Whether you are getting married at a young age or you’ve waited a bit before deciding to formalize your relationship, it can be beneficial to think strategically and determine a clear sense of what to expect from your marriage or common-law relationship.
Estate ramifications
People often forget the interplay between prenuptial agreements and their future estates. In fact, estate planning is often a significant motivation for securing a prenuptial agreement. The pre-marital agreement is an opportunity to put your mind to how you want your estate to look regarding your current relationship and your other family dynamics.
What you can’t include in a prenup and future adjustments
The one area that a marital agreement doesn’t cover is anything related to parenting responsibilities and financial support for children you have together now or in the future.
Note that you can adjust what you agreed to in your prenup later in your union to reflect any changes through a new spousal agreement.
Be sure to make your prenup legal
Although it’s not required to hire a lawyer when creating a prenuptial agreement, making sure the contract is binding is worth the investment. As well, it is imperative that your spouse or partner also has legal advice from their own lawyer to make sure that the rights of both parties are protected.
Even though the collaborative law process is becoming more common for separation and divorce, folks often don’t think of it as an option for prenuptial or cohabitation agreements. However, with its transparent process, collaborative law is well suited for discussing how you plan to resolve issues in the future.
Plan for the best, prepare for the rest
While it is impossible to know what the future holds, a prenuptial agreement can provide some certainty for you and your soon-to-be spouse, ensuring that if the unthinkable happens, you’ll both be protected and get through a separation with the least conflict possible.
By Alyssa Bird
If you have questions about this post or collaborative law in general, contact me today at [email protected].