I’m a young professional and I am currently engaged to be married. I’ve heard of people signing prenuptial agreements. What is a pre-nup and do I need one?
What people call a pre-nuptial agreement, or a “pre-nup” is called actually called a marriage contract in Ontario. If a marriage meets an unfortunate demise, the marriage contract provides the parties with a high degree of certainty about how they will proceed in the event of a divorce. Marriage contracts are generally the exception as opposed to the rule; they are often seen as being pessimistic, unromantic, or calculating. However, those who have had to rely on them will generally recommend them for providing clarity and guidance in a difficult time. They are generally more common in second marriage situations; the parties having already been through marital breakdown and, generally speaking, a more mature asset base and shorter distance to retirement. These factors increase the practical appeal of a marriage contract.
In order to have a valid marriage contract, it is important the parties be operating with full financial disclosure and an informed understanding of their legal situation. They are most commonly invalidated for a lack of full financial disclosure, or matters such as undue influence or fraud. A contract will generally be upheld when it is apparent that both parties gave and received full financial disclosure and they were fully aware and informed as to the legal consequences of the contract. Each party should have independent legal advice. This protects against a future claim that one party was not fully aware of what they were signing.
Marriage contracts are particularly advisable in situations where the parties have significant disparity in their incomes or asset bases. In those situations, one party may have particular concerns about exposing their assets to the other party in the event of a divorce. A valid marriage contract drafted by a family lawyer can act as an effective insurance policy against a financial setback.