When the Law isn’t Necessarily the Law
The essential question is this: can a marriage contract stipulate terms contrary to the Family Law Act?
In a word, yes it can.
If you receive a marriage contract from your significant other prior to getting married, and it contains a clause something like this: “By this agreement, A and B intend to restrict or modify their rights and obligations under the Family Law Act…” it is completely legal to do so. And of course, you have the same rights should you wish or need to. No other Ontario law allows people to redefine its terms. However, as the Attorney General’s website explains, “Couples who feel that the law does not suit the kind of relationship they have can make other arrangements in a marriage contract.”
The Family Law Act of Ontario sets out and governs matters of cohabitation and family relations for both common law and married couples. It establishes and governs such issues as the financial arrangements for separation, the key focus being on assets – property and money – as well as support payments (alimony), child related issues, and more. It also sets out the framework for what is colloquially termed, a “prenup” – the financial agreement between two people entering into a relationship, common-law or marriage; although it’s a catchy name, the ‘prenup’ is more accurately and legally referred to as a marriage contract in Canada.
Why does the Family Law Act allow us to modify the law in marriage contracts?
Let’s back up a bit: all things being equal, the Family Law Act “treats your marriage as an equal economic partnership” (attorney general). This works well when two young people begin their adult lives together, building their marriage equity over the years, eventually buying a home, accumulating saving investments, and so on. Should this marriage unfortunately end in separation and divorce, the two ex-partners are entitled to divide the family assets more or less equally and this works well, as intended. Society has changed, however and people now tend to marry later in life which, in turn, affects the traditional pattern of couples building equity together.
One-size doesn’t necessarily fit all
Given that people might marry at 35 or later instead of 25 or earlier, they now have more ‘single-time’ to develop careers and accrue mature financial means. One or both partners might have an inheritance, investments, already own a home, have a thriving business and so on. They might also have dependents for whom they want, or need, to provide. These people will likely want to protect their assets, even if their new relationship is successful and loving, and especially during its early years. It is for such situations that the Ontario Family Law is flexible and the custom-made marriage contract exists.
Love and Marriage or Corporate merger?
It might prove difficult to find a pair of symbols more diametrically opposite than an engagement ring and a legal, binding marriage contract. At a time when romance should be in full bloom, when you and your significant other should be exchanging gifts of love, you receive…a legal marriage contract drawn up by your partner’s lawyer. And yet as just explained, there really is indeed a need for both people in the relationship to protect themselves, especially in these more “financially mature” relationships.
The classic case that makes the news headlines is that of the rich person marrying someone lacking the same financial wealth, and then a relatively short time later, being served divorce papers and sued for half the estate plus more than generous marital support payments. Clearly, for spouses with something to lose, the marriage contract offers protection from such devastation.
On the other hand, the recipient of this contract, the one with fewer financial means, might feel powerless, unloved and insulted reading a document which says the house is mine, the business is mine, the bank accounts are mine: I keep what I have and you keep the little that you have. We all want to feel valued, loved and appreciated for other types of contributions that we make to the relationship.
A fine balance
With respect to Rohinton Mistry for borrowing the title of his excellent novel, it perfectly describes what is needed in marital contract negotiations. Each partner needs to understand the other’s position in order to arrive at that “fine balance,” a fair compromise which allows us to resolve these issues without leftover bitterness and rancor. With the passage of time, if indeed there develops a successful relationship, the financial inequality should begin to meld into more of that “equal economic partnership.”
A willingness to compromise and to see the other point of view will also save considerably in lawyers’ fees, especially since each person needs a separate lawyer. And when the lawyers require each partner to produce full financial disclosure, although it might seem an annoying intrusion into your privacy, remember that full financial disclosure is the lynch pin to a domestic contract being strengthened: the operational word today is “transparency.” The law and judges don’t take kindly to deceit, and if a financial omission is discovered during separation or divorce court cases, it is regarded as misrepresentation which can be devastating for the offending party. Nevertheless, each party is advised to demonstrate responsibility by making the request for such disclosure from the other.
The matrimonial home and property division
You are indeed allowed to exclude certain monies and property from a contract, including personal gifts, an inheritance (money or property) and personal insurance payouts. However, “any increase in the value of this property during [the] marriage must be shared.” (attorney general). A major exception to this is that of the family or matrimonial home; note that this is not applicable to common-law couples, but if a marriage ends, “the full value of the family home must be shared even if one of you owned the home before you were married, received it as a gift or inherited it.” Even here Ontario law is somewhat flexible: couples can agree to a different split and can ask the court to divide things differently in circumstances when an even split “would be extremely unfair to one of you.” (attorney general).
If you’re contemplating a marriage contract, or if you received one, you should obtain legal advice. At Howard Nightingale Professional Services, we offer a free, half-hour consult with regards to retaining our services. We are conveniently located in the Toronto area and can be reached at Howard Nightingale Professional Corporation, 416 633 4423 (toll free 1 -877-224-8225), or begin with a visit to our website, www.howardnightingale.com.