For recently engaged couples the future looks promising, filled with wedded bliss and happily-ever-after. However, in love and marriage, the law giveth and the law taketh away. This article discusses how a prenuptial agreement (also referred to as a marriage contract) can help protect your assets from being “taken” in the event of a divorce.
Upon divorce, depending on specific circumstances, a divorcing spouse may be entitled to one-half of the value of property owned by the other spouse which was acquired or accumulated during the marriage1. The only property not divisible at divorce is property which was received as a gift or inherited during the marriage by a spouse, and remained segregated (title not mingled) during the marriage. To by pass the law that governs division of acquired and accumulated property upon marriage breakup, many couples enter into a marriage contract2. The purpose of the marriage contract is to prevent the legal regime of the province from governing property division between the spouses, in the event of a marriage breakup3. The marriage contract is an attempt to prevent the law of Equalization of Net Family Property (and other laws pertaining to division or “sharing” of property between divorcing spouses) from applying. Marriage contracts are typically entered into prior to the marriage (hence the term ‘pre’ nuptial). However, they can also be signed during the marriage, or amended, at any time during the marriage.
Marriage contracts typically address what is to happen not only in the event of divorce, but also what is to happen in the event of a spouse’s death. In such circumstances the marriage contract and the Will must be “in sync.” That is, marriage contracts override Wills (as do all contracts), and the Will must comply with the terms of the marriage contract. For example, you cannot gift more generously to your surviving spouse via your Will than in the marriage contract, unless the contract states that you can do so. Typically, the Will states that the testator is a party to a marriage contract already in existence, citing the marriage contract by its date.
Regardless of age, there are many reasons spouses-to-be enter into marriage contracts. Provincial family law regimes equalize the difference in net worth acquired or accumulated by each spouse during the marriage, as at Valuation Date (date of separation)4. In Quebec, the effect of a marriage contract is to “engage” the law which the spouses have elected (e.g. Separate as to Property, Partnership of Acquests) to govern the division of their property in the event of marriage termination. In all other provinces, a marriage contract is typically used to limit (or eliminate) the effect of the law from governing property division in the event of divorce. First time newlyweds from wealthy families are often encouraged to request of their fiancé or fiancée to sign such a contract. Since a marriage contract operates by ousting the provincial family law, it is important to be cognizant of the province’s acceptable standards to ensure validity and enforceability of the contract.
For example, if a divorcing or survivor spouse is left inadequately provided for, the court can exercise its jurisdiction and intervene in favour of that spouse.
The matrimonial home (“home”) is a “sacred cow” among assets. It is treated differently from all other types of property in the context of family law. Each spouse has an equal right of possession and occupation of the home, regardless of titled ownership. Where both spouses own the home, neither spouse can sell or mortgage the home without written consent of the other. For this reason a marriage contract will contain a section that deals specifically with the matrimonial home. Thus, while the marriage contract can limit or exclude altogether a non-owner spouse from receiving a share of the value of the home, a provision in a marriage contract purporting to limit a spouse’s rights to possess and occupy the home is unenforceable. The divorcing spouses’ respective occupation of the home, and short- and long-term living arrangements in the home,will be made by the court at the time of marriage breakup, and will depend on many factors, including the age of any children and circumstances involving them.
Marriage contracts are not only for the rich and famous. They are legally binding and enforceable agreements which, if drafted properly, provide a viable alternative to litigious court appearances. If a marriage is in your future, and you’re concerned about protecting your assets in the event of divorce, speak to a family law lawyer to discuss how a marriage contract could benefit your situation. Let's discuss if you have any questions.
1. Quebec Civil Code differs from common law provinces' matrimonial or family law regimes.
2. In Quebec, as explained briefly below, marriage contracts operate differently.
3. Marriage breakup occurs due to separation/divorce, OR, death, with each type of event bringing about its own consequences regarding division of property. This article focuses on the breakup as a result of separation/divorce.
4. The default position of the law in Quebec may differ.
Terri A. Szego