You’re getting married and can’t be happier. Invitations went out, flowers are picked, and you finally settled on a venue. But have you settled on your finances? And what happens to them in the event of a divorce? Oh no, that won’t happen to me — said the 48% of Canadian couples who divorced anyway. Millennials were witnesses to this phenomenon in the previous generation. Here’s where a pre-nuptial agreement comes in.

Like any legal document, prenups have a ton of twists and turns that confuse and intimidate couples. Not to mention the outdated stigma attached to them. A wealth manager could help you understand how prenups protect your assets — but in the meantime? We’ll walk you through pre-nuptial agreement basics, how Canada views them, and why it’s a financially savvy move for any couple. 

Pre-Nuptial Agreement

What is a pre-nuptial agreement? 

A pre-nuptial agreement is a legal document that describes a couple’s individual rights to assets upon divorce or an otherwise ending to the marriage. Ontario’s Family Law Act defines a few provisions marriage contracts (prenups) cover, including: 

  • Support obligations
  • Assets and affairs
  • Rights when it comes to education for the kids
  • Division of property

Now, what does all this look like in divorce? You might ask yourself: 

  • How do you deal with lawyer fees? 
  • Who gets the house? 
  • Who settles the debts
  • What does alimony or child support look like? 

Or even more scandalous… 

  • What happens if somebody’s unfaithful? 

In a traditional marriage, everything is split down the middle, no matter who earns or does what. With a pre-nuptial agreement, you decide exactly what all these numbers look like in every situation. Prenups also describe financial roles and responsibilities depending on specific circumstances. For example, a pre-nuptial agreement might allot more alimony to one partner if they forgo their career to stay home and raise a child. Similarly, prenups could be time-based, where you could decide on certain provisions applying to the first five years of marriage, with new provisions to be put in place when that time period lapses. It all depends on what you and your spouse to be desire and agree to financially!

Keep in mind that pre-nuptial agreement law varies by province and territory. For more information, consider consulting an expert.

Related Reading: Will Planning Guide Canada

Why get a prenup?

Here are the main reasons why couples get prenups: 

  • Protecting assets: This might look like one spouse being significantly wealthier than the other, and wanting to protect their wealth. But lately, wealth disparity isn’t always a qualifier for wanting to protect your assets. A divorce scuffle could result in thousands in legal fees — but you could mitigate those fees by deciding beforehand exactly what you agree to do in that event, instead of dragging things out with lawyers. 
  • Avoiding debt: While you don’t usually inherit your partner’s debts upon death and divorce, you might in certain scenarios. A pre-nuptial agreement could have provisions to protect a spouse and children from applicable debts. 
  • Peace of mind: The world of finance is stressful enough for one person, let alone a couple or entire family. A prenup offers a sense of security in the fact that both couples can agree on what a future would look like in the worst-case scenario. Plus, it reduces the immense emotional strain that comes with a divorce. 
  • The children: Most parents want to ensure financial stability for their children if they’re able to help it. But if they’re busy fighting over assets and draining savings into lawyer fees, the kids lose the most. A pre-nuptial agreement might stipulate a trust fund that each spouse must contribute to in the event of a divorce. Similarly, you might get a prenup to protect children from a different marriage, ensuring they keep their inheritances intact. 
  • Business protection: Your business might be worth a lot on paper, but splitting it down the middle might not be possible without selling or liquidating. The result? The years of work you put into your business could be fruitless after a divorce. Prenups help people protect their businesses. 

While any couple can benefit from a prenup, they’re especially vital for: 

  • Couples with big wealth disparities
  • Couples on their second marriage
  • Couples with children from a previous marriage
  • Couples with a ton of debt coming into the marriage

Now, let’s get into the nitty-gritty of enforcement. Does the Canadian government recognize your pre-nuptial agreement?

Are pre-nuptial agreements legally binding?

The answer is yes for most countries, but not all. For example, Singapore doesn’t enforce prenups as a baseline, though they’re considered in court. Muslim countries like Saudi Arabia and the UAE recognize prenups, but not if they go against Sharia Law. Luckily, Canada sees prenups as legally binding in most scenarios. 

Are prenups valid in Canada?

Yes, prenups are valid and enforceable in Canada. However, they must meet a few basic criteria to be considered valid: 

  • Writing: A verbal prenup isn’t sufficient for the courts. You need to document all provisions of your pre-nuptial agreement on paper. 
  • Signed: Both spouses must sign the prenup for it to be valid. 
  • Witness: A witness must sign the prenup. 
  • Comprehensive: All assets must be considered in a pre-nuptial agreement. 

Ontario’s Family Law Act allows the courts to dismiss certain aspects of a pre-nuptial agreement in unique cases. For example, a spouse hiding assets might be ordered to include them as premarital property. Similarly, a devastating disability on one partner might encourage a judge to alter financial stipulations in a prenup, especially if a child is involved. But again, the specifics of the pre-nuptial agreement laws varies by province and territory.

How long is a prenup valid in Canada?

Prenups are valid for the entirety of your marriage, up to a date you and your spouse agree upon, or up to the date that you both decide to change it. In other words? Prenups are pretty flexible.

You can even enforce a contract between couples who aren’t married: this is known as a cohabitation agreement. Remember, common law applies to every couple living together for longer than a year. 

Can you get a pre-nuptial agreement after you get married?

Certainly. You might decide a few years into your marriage that you want the security of a pre-nuptial agreement. Or, certain new events might urge you to put some wishes down on paper. Post-nuptial agreements, or marriage contracts established after getting married, are also perfectly valid in Canada as long as they follow family laws in your respective province or territory.

Related Reading: Canada Inheritance Law: How it Works

How much does a prenup cost in Canada?

Technically, pre-nuptial agreements could be free if you draft them yourself. In fact, the Law Depot has this handy pre-nuptial calculator to help you flesh out your ideal prenup. The calculator asks you a few qualifying questions like whether you live with your future spouse, your province of residence, names, assets, and populates an enforceable prenup for you both to sign. If you’re tight on funds, this is a fabulous option for any couple. 

But family law is a tricky beast, and you’re going to want to ensure you know all of your rights before you sign on the dotted line. Meaning? It’s best to talk to a lawyer and have them draft the agreement for you. Different law firms might have different price tags depending on their tenure and the complexity of your agreement. For example, Ontario-based firm Shaikh Law Firm charges anywhere between $499 to $2,000 for a pre-nuptial agreement. 

Pre-Nuptial Agreements and You

Bottom line? Pre-nuptial agreements are legal instruments that protect you in the event of divorce. They’re flexible and tailored to each couple’s unique financial scenarios, values, and wishes. Plus, they’re a great way to feel secure going into a marriage. Still, it might be hard to dissect how you want to approach your prenup. Which assets will you consider premarital property, and how does your split change if you have kids? The answers to these questions depend on the individual, but it isn’t always easy to figure things out solo. 

Need support managing your wealth before, during, or after marriage? Wealth Management Canada links thousands of Canadians like you to certified wealth managers every day to discuss their future and plan for financial stability. Find your wealth manager today!

Read More: Income Splitting Canada

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