Prenuptial agreements (also known as marriage contracts) have long been a contentious subject. In fact, the Coen brothers’ film Intolerable Cruelty uses a prenuptial agreement as a major plot point! Some people say that a prenup is essential for any marriage, and other people say it’s only necessary if one of you already has significant assets, or that a prenuptial agreement makes it seem like you’re expecting to get divorced.
If you are thinking of living common law, you would do a cohabitation agreement. Essentially, a cohabitation agreement, pre-nuptial agreement and a marriage contract are different names for the same thing with minor differences. They are domestic contracts that detail what will happen to your assets should your relationship end.The answer to whether you should get one done, of course, varies from couple to couple. It all depends on what assets you have, what future assets or liabilities you may need to consider, and, of course, your personal beliefs.
Pros and Cons of Prenuptial Agreements
- Pro: You’ll have a chance to discuss finances in detail. Money is the cause of a multitude of marital disagreements, and this is often because a couple hasn’t had a thorough discussion of their goals and attitudes around finances. Drawing up a prenuptial agreement requires the two of you to go over all of your assets and liabilities in detail and discuss your financial goals. No matter what terms you settle on for the agreement, you’ll start your marriage knowing that you’re on the same page financially.
- Con: A prenup can make it seem like you don’t take your marriage seriously. A common objection to prenuptial agreements is that by getting one, you are signalling that you don’t expect your marriage to last, and that you don’t take the relationship seriously. On the other hand, the argument can be made that a prenup indicates that you take your relationship extremely seriously by making provisions in advance for a worst-case scenario.
- Pro: You can settle potentially contentious issues in advance. No one goes into a marriage planning to get divorced, but it does happen. By deciding now how to divide any assets in the event your relationships breaks down, you’ll make things immeasurably easier should that actually happen.
- Con: The prenuptial agreement itself can cause conflict. If one of you wants to draw up a prenuptial agreement but the other is against it, this can prove to be a difficult dilemma. Only you can decide how important the issue is, and whether or not it’s a deal-breaker.
Who needs a marriage contract, prenup or cohabitation agreement?
Often we do these agreements when the couple are older and have accumulated some assets previous to meeting each other. Many times it is their adult children who are insisting on the agreement because they worry that their parent’s assets (their inheritance) may be lost to this new love interest.
Sometimes a client who owns their own business or has an interest in family-owned business will want to protect their business from any claim by their soon-to-be spouse.
Others just do not want to intermingle their finances so they get an agreement done that says “if we separate, we each get to keep our own assets free of a claim by the other”. Essentially it is a “mine is mine, yours is yours” agreement.
Another good reason to get a marriage contract is to fix what I consider a mistake in the law. If you own a home, get married and live together in that home and then separate, you have to share all of the equity in that home. You don’t get any credit for the portion of the equity you brought into the marriage. This is not true any other asset. For example, if you bring some investments into a marriage, you only share the increased value of the investments upon separation (not the entire value of the investments). So, if you own a home that you intend to live in after marriage, let us fix this mistake in the law so that if you separate you only have to share the increase in value of the home.
What Goes Into a Cohabitation, Prenup, or Marriage Agreement?
These agreements are chiefly concerned with finances, and you may decide to address any of the following issues:
- Individual assets and liabilities: You’ll itemize any property or other assets that you each owned prior to the marriage, as well as any debts, including student loans or consumer debt.
- Shared assets and liabilities: This includes any property or debt that you’ve taken on together and makes provisions for how to handle anything else that you acquire in the future. You’ll make a detailed plan on how your shared assets and liabilities will be divided in the event of a divorce.
- Provisions for children: If either of you has children from a previous relationship, the prenup can include information on how they will be considered when dividing assets and liabilities.
- Spousal support: You may not be able to pin down a specific dollar amount, but you can decide whether spousal support will be paid, and how it will be calculated.
Anything related to child support and custody arrangements will not be covered in a prenup, marriage or cohabitation agreement. Child support is governed by established federal guidelines, and who is reasonable for the care of children cannot be determined in advance.
Should We Get a Marriage Contract, Cohabitation Agreement or Prenuptial Agreement?
If neither of you has any significant property or debt going into your relationship, then an agreement may not be necessary, especially if you are getting married. If your marriage comes to an end, then any assets or liabilities you gained together will be divided according to an existing formula.
A cohabitation agreement when you live common law is probably a good idea because, unlike in marriage, you don’t automatically share in the assets you and your common law partner build during your relationship. An cohabitation agreement is a better way to ensure a fair sharing of the wealth accumulated during your common law relationship.
Ask yourselves the following questions to help decide whether you should consider an agreement:
- Do you own real estate?
- Do you own a business, either fully or partly?
- Do either of you plan to continue your education while you are married?
- Do you anticipate inheriting property?
- Do you have children from a previous relationship?
- Does your will name any beneficiaries apart from your spouse and children?
- Do you have stock options or retirement savings?
If none of these situations apply to you, then you may not need to worry about a agreement. However, if you answered “yes” to any of these questions, it’s a good idea to settle any potential issues well in advance. Even if you never end up needing to use the agreement, just knowing that those problems have already been solved can set your mind at ease.
Contact Galbraith Family Law for Expert Advice
Are you planning to get married and would like to draw up a prenuptial agreement? Galbraith Family Law will be happy to help. Call (289) 802-2433 in the Newmarket area or (705) 302-1102 in Barrie. You can also send a message through our website.