Talking about money is not an easy thing when it comes to relationships. It becomes especially complicated when two people have different ideas about money or one has more than the other. When a couple is ready to take the next step by getting married or moving in together the topic of a prenup may come up. This can be a difficult conversation to have, but a necessary one if you have valuable assets that you would like to protect. Here are a few things to consider when broaching a prenuptial agreement.
In Ontario law a prenup is called a domestic contract
While you may know the word prenup from TV and Hollywood movies the term is an American one. In Canada, and Ontario in particular, prenups are called domestic contracts. Domestic contracts cover both marriage contacts and cohabitation agreements and act in a similar way to the American prenup. Both are used to organize a couple’s finances, clarify their rights and responsibilities in relation to one another and govern the division of property should they decide to part ways.
Domestic contracts are used for more than just protection of assets
Although one of the main purposes for a domestic contract is to protect assets in the event of a break up there are other things you can include to make sure you and your spouse are on the same page. This includes how you want to share or divide bills and living expenses, spousal support obligations and deciding who has the right to direct the education and moral training of your children. Any other matter that involves the settlement of your affairs can also be included in a domestic contract. Things that can not be included in a domestic contract are: custody rights and child support, possession of the matrimonial home (although this is only applies to people who are married), distribution of more then 50 per cent of a pension to one person and prohibition of a spouse from entering a relationship with someone else.
There must be full financial disclosure when creating a domestic contract
Each party must be honest about what they have in terms of assets or the contract could be deemed void. If something like a hidden bank account is found during divorce proceedings anything that has been agreed upon in the domestic contract may be invalidated and all assets may be divided equally between the two parties.
You can create a domestic contract even if you are already married or living together
Despite the American term prenup (short for pre-nuptial) domestic contracts can be created at any point in a relationship. There is no legal reason why a domestic contract needs to be finalized before marriage or co-habitation. Domestic contacts can be created if one person comes into a considerable sum of money (such as inheritance) during the marriage or cohabitation and wants to protect it. Even so, many lawyers say that it is a good idea to start discussing a domestic contract before you move in together or get engaged. This may seem unrealistic (and un-romantic) but putting the idea out on the table as soon as you know the relationship is serious is a good rule of thumb.
Don’t rush into a domestic contact
Occasionally the idea of a domestic contract is brought up weeks before a wedding and becomes a wrench thrown into what is supposed to be a joyous occasion. It is important that neither spouse feels pressured into signing a domestic contract and that they are on board with everything outlined in the document. This is not only for the sake of the relationship but also because a domestic contract can be deemed invalid if one person feels like they signed it under duress. Domestic contracts are highly sensitive and personal documents and making sure you are not pressured into signing it by your partner or outside sources (like parents) is extremely important.
Be aware of how a domestic contract can affect your relationship
It is important to note that up to 30 per cent of relationships fail in the process of creating a domestic contract. This is because it forces people to think about their priorities and if they are not in line with one another the relationship often dissolves. People have to confront their differences and talk about the future which can be tough for any couple. Domestic contracts can be very important documents, but you should also remember the repercussions of asking your potential spouse to discuss and sign such an agreement.
In a world full of second marriages and blended families, domestic contracts are becoming more and more popular. People are entering relationships where there is a disparity in assets and they are choosing to protect themselves and their money. If you think a domestic contract would be a good option for your relationship make sure you educate yourself about the pros and cons and find a lawyer who will help guide you and your partner through the process in as stress-free a way as possible.