To Pre-Nup Or Not To Pre-Nup: That Is The Question

When someone creates their Last Will and Testament, they are not hoping to die. It is simply responsible legal and financial planning. Likewise, when a person creates a Prenuptial Agreement, known in Ontario as a Marriage Contract, he or she is not hoping to divorce. Both a Will and a Prenup are prudent planning tools. With proper legal and financial advice, precautions can be taken to ensure that one's wealth is preserved despite cohabitation or marriage. The cost of administering an estate without a Will is much more complicated, time-consuming and costly than administering an estate with a Will. Similarly, a divorce with no Prenup is equally complex, protracted and expensive.

Whether you are in a relationship, cohabiting, or engaged to be married, an important question you should ask yourself is what will happen to your income and assets in case your relationship ends.

The asset that most people wish to protect is their home. Under Ontario law, marriage automatically invokes legal rights of the non-titled spouse to the occupation and sharing of a matrimonial home. In fact, the law provides that there can be more than one matrimonial home including cottages, ski chalets and yachts. It is even possible for non-titled common-law spouses to make a claim to their spouses' family residence or business. Failure to account for these realities, and to take the necessary steps to prevent potential conflict, can result in significant uncertainty and cost.

A Prenup is typically used to preordain each spouse's financial future in case of separation or death. It is a contract that establishes how your assets and/or income will be divided. It serves as a blueprint as to who gets what and who pays who. If neither spouse has significant income or assets, a Prenup may not be needed. Each person's individual circumstances differ and so it is prudent to consult a lawyer before cohabitation, and certainly before marriage.

The adage of "do it right the first time" definitely applies to contracts in the family context. If you are going to commit the time, energy and money to creating a contract, you should ensure due diligence. This is the time to incur the added cost of a family law specialist. Knowing how to carve out and protect discrete assets in the Prenup and making or obtaining the requisite level of financial disclosure will strengthen the validity of your contract. Striking the right balance requires expert advice. Since these contracts are generally not closely examined until many years and sometimes decades later, it is critical that they are complete, valid and binding.

Marriage and cohabitation are very personal and emotionally-driven decisions. But they have significant legal and financial consequences. It is much safer and cost-effective to plan in advance and establish the consequences of break-up than to suffer the unpredictability and expense of resolving the financial consequences of a separation without a Prenup.

Steve Benmor is certified as a specialist in family law by the Law Society of Upper Canada and also serves as a private divorce mediator and arbitrator for high net worth families. Steve can be reached at steve@benmor.com