“Pre-nups”, Cohabitation Agreements and Marriage Contracts

From time to time we are retained to prepare a “pre-nup” for a client.  This term is in common use among clients, and in full it means a “prenuptial agreement” (an agreement made prior to marriage).  In practice, however, it means any agreement that a couple may wish to make to set out their rights and obligations towards each other by means of a binding contract rather than relying on the general law that applies if there is no agreement.

These agreements can cover both married and unmarried (common-law) relationships, and they can be made prior to moving in together or marriage or at some point after the commencement of the married or common-law relationship.

Like any type of contract, the goal is to establish both partners’ rights and obligations so as to provide both partners with certainty and predictability in the event of the termination of the relationship. While that does not sound very romantic, the truth is that all relationships eventually come to an end in one of three ways:

  • There is a relationship breakdown (one or both partners actively terminate the relationship because they don’t want to be in it anymore).
  • One of the partners becomes incapacitated.
  • One of the partners dies.

These kinds of agreement are particularly useful for dealing with property issues.  For example, you can use an agreement to:

  • Preserve certain property that was originally yours from claims by your partner.
  • Determine how increases in value to property will be dealt with. (Will it be shared or will an increase in value be only for the benefit of the person who is the legal owner?)
  • Determine how you will acquire new property.  (Will it be in the name of one of you or both of you?)
  • Determine how property will be disposed of during the relationship. (For example, who gets the proceeds of any sale?)
  • Determine how property will be dealt with at the end of the relationship.  (This may be different depending on whether the reason for the termination of the relationship is a breakdown, incapacity or death.)

You can also use this kind of agreement to deal with issues involving children and financial support for your partner.  For example:

  • What is the plan if you have a child or children together?  (Will one of you be staying home to raise the child?  If so, for how long?  What about the financial effect that staying home may have on the ability of that parent to earn income in the future?)
  • What is the plan if there are children from a prior relationship?  (Is the “step-parent” going to function like a parent or not?  Will he or she be expected to contribute directly or indirectly to the financial care of the child?)
  • What are the plans for work and home life?  (Will both of you be working, or will one person stay home?)
  • If there is a relationship breakdown, how will each partner support himself or herself in the future?

Finally, It is important to note that lawyers play a vital role in ensuring that any agreement of this type is binding and enforceable.  The lawyer contributes two very important things:

  • The agreement is in writing, and is both clear and comprehensive.  While clients often attempt drafting these agreements themselves, the result is rarely clear and comprehensive.  This is for good reason:  lawyers have the specialized training to identify, analyze and advise you on all of the legal issues discussed above, and many more. Normally, a lawyer is retained by one of the partners in the relationship to produce the first draft of the agreement.
  • The agreement is signed with both partners having independent legal advice before signing. Many a time I have heard clients express dismay that a second (and independent) lawyer needs to be involved.  Obviously there is some additional expense involved, but it is for the important goal of ensuring that neither party can ever say in the future, “I didn’t understand what I was signing”, or “I had to sign the agreement – I didn’t have a choice”.  Having independent legal advice on both sides effectively prevents this sort of problem from arising because it is the lawyer’s job to clearly explain and provide advice about every aspect of the agreement so that the client makes the active and informed decision whether to sign the agreement. (We’ll have more to say about independent legal advice in a future blog post.)

This blog post discusses the law in Alberta relating to these issues but it is not intended to be legal advice for any particular situation.  If you want legal advice, then meet with a lawyer so that you can get it.

(photo “DIY Prenup Photoshoot – Fort Canning Park” by Bambi Corro III is licensed under CC BY-ND 2.0)

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