Written by Kara-Lynne Chapman
What comes to mind when you hear the word “prenup”? Do you think of wealthy people protecting their assets? Do you think of a couple who are planning to fail? Perhaps your first reaction is to think “that’s so unromantic”. What if I told you that marriage contracts/cohabitation agreements (aka “prenups”) are actually quite romantic in nature and can help marriages survive and thrive? Let me explain.
Marriage is a contract and terminating that contract through separation and divorce has serious consequences. Many people who get married do so at a relatively young age and have not yet had an opportunity to amass any assets. However, ten or twenty years down the road, the financial landscape often looks very different. It is common for us to meet clients who started with nothing and amassed significant wealth throughout their marriage. Upon that marriage breaking down, if there is no agreement in place on how to distribute those assets, the law steps in and demands an equal distribution between married parties regardless of whose efforts resulted in that wealth (note that common law parties are treated differently under the law).
The law is also peculiar when it comes to matrimonial homes: if one spouse already owned the home on the date of marriage, the value accrued up to that date is still subject to equal division upon separation unless there is a marriage contract in place that says otherwise. This is often an unexpected quirk of the law for our legally married clients. For common law spouses, it is possible for one party to make a financial claim against the home even if it is owned solely by the other.
Financial issues are also one of the biggest causes of conflict when a couple separates. There is often disparity in the parties’ incomes and this can lead to fear and resentment on both sides. One spouse may be wondering how they will survive financially while the other is worried about being taken advantage of. This fear can come across as anger and can inflame an already tense situation.
Finally, it is not unusual for one spouse to have significant debt that they fail to disclose to the other prior to marriage and this can result in long-term consequences in the marriage; mistrust and bitterness can fester. Having to disclose all assets and liabilities prior to marriage or cohabitation can avoid this.
The negotiation of a marriage contract or a cohabitation agreement allows partners to have open and honest discussions about their finances at a time when they are not facing the turmoil of a separation. Cooler heads can prevail and they can establish a roadmap that will, hopefully, allow them to navigate marriage without these financial fears and consequences looming over them.
In other words, a prenup is a way of saying “I want the best for us and our partnership”. See? Romantic.
