Benefits of a marriage contract, cohabitation agreement

A marriage contract and cohabitation agreement, sometimes referred to as a “prenuptial agreement” or “pre-nup” is not just for celebrities and the very wealthy. Many couples benefit from these agreements as they can clarify expectations about the financial parts of their relationship.  

Who uses a marriage contract and cohabitation agreement?

Any couple can enter a marriage contract or, if they are living together with no plans to get married, a cohabitation agreement. The couple may be in the early stages of their relationship or together for many years. The contract becomes legally binding once it is in writing, dated, and signed and witnessed by both parties. Both parties need to be over 18 years old and not be under any incapacity when they sign the agreement.

What do these agreements cover?

Every couple will have different goals and priorities, such that the contract should be tailored to meet each couple’s specific needs and goals. In general, the contract is used to set out what will happen upon a breakdown of the relationship. This could include setting out expectations about spousal support, how property will be divided, and what will happen to the home they are living in.

For spousal support, some couples may wish to put limits on how much may be paid if the relationship breaks down or set out how income will be determined to calculate spousal support. Other couples may wish to include a mutual release of spousal support. Still others may wish to affirm that they intend to abide by the applicable legislation if the relationship ended.

For property issues, some couples may choose to limit what can be shared upon a breakdown of the relationship, or they may wish to carve out specific assets so that they are not subject to equalization or division. Others may opt to follow the law as it relates to division of property but spell out the values of various assets and debts as of the date of marriage so that it is clear what each person is bringing into the marriage.

These contracts can be helpful in clarifying expectations with respect to a family home, particularly in situations where one spouse owned the home prior to marriage or where one spouse paid a disproportionate amount of the down payment on the home.

These contracts do not address decision-making responsibility for children or how parenting time will be allocated if the relationship breaks down because those issues are determined by the best interests of the children at the time the relationship ends. Additionally, couples cannot include terms that deviate from child support legislation.

When are these agreements signed?

Couples can enter a marriage contract at any time prior to or after they are married. Cohabitating couples can sign a cohabitation agreement at any time. However, these agreements can be set aside by a court on the basis that one party was coerced into signing the agreement or was under duress. Accordingly, it is important to take note of what is going on around the time the agreement is being signed. For example, it may not be advisable to negotiate and sign an agreement amid a very stressful life event or close to a wedding date. 

How do I get a marriage contract or cohabitation agreement?

To start the process of getting a marriage contract or cohabitation agreement, an interested person should speak to a family lawyer about their options. Each party to the agreement should have their own lawyer to provide them with legal advice. One lawyer cannot act for both parties to the agreement.

A lawyer will walk you through your goals for the agreement and provide advice on what options may make sense for you. As part of the process, a lawyer will ask you for information about your income, assets and debts and will make efforts to get this information from your spouse. Failing to disclose information about income, assets and debts can be a reason to set aside one of these contracts later on.

The process for negotiating and finalizing one of these agreements can take several months or sometimes longer, depending on the complexity of the issues.

While there are template agreements that may be available on the internet, signing an agreement that you have not reviewed with a lawyer is risky. Internet agreements may contain terms that are unenforceable or create obligations that the parties do not fully understand.

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