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Posted on February 21st 2006 in Legal Articles

The Business of Marriage

The Business of Marriage

You are in love and about to enter the state of wedded bliss, so why would you even consider something as unromantic as a marriage contract?! There are actually a number of very sound reasons for entering into an agreement with your intended and they do not all have to do with your marriage ending.

In Ontario, couples who are married or intend to marry, can enter into a marriage contract. This type of agreement can regulate the spouses’ respective rights and obligations during the marriage, on separation and on death. Under the Family Law Act (FLA), these rights and obligations include:

1. ownership or division of property;

2. support obligations;

3. the right to direct the education and moral training of the children; and

4. any other matter in the settlement of their affairs.

Although you can include promises of a personal service nature, for instance who does which chores, they are likely to be unenforceable.

In the absence of a marriage contract, the FLA provides the rules and formulas to be applied in the event of a marriage breakdown or the death of a spouse. Very briefly, these are some of the rules.

Spousal Support – Every spouse has an obligation to provide support for the other spouse, in accordance with need, to the extent that he or she is capable of so doing.

Net Family Property – Net family property is your net worth at the date of separation (calculated by valuing all property held at that date less debts) less your net worth at the date of marriage. For people who start marriage at “zero”, this effectively means the value as of the date of separation of all property acquired during marriage less debts at the date of separation. Following the breakdown of the marriage, the spouse, whose net family property is the lesser of the two net family properties, is entitled to one-half the difference.

Excluded Property – Certain property acquired during the marriage, such as inheritances and life insurance proceeds, is excluded from net family property. However, this exclusion does not extend to the matrimonial home.

Death – When one spouse dies, the survivor is entitled to elect whether to take their entitlement under the deceased’s will or to receive one-half of the difference between their net family properties.

Based on these rules, the following are some examples of why you might consider entering into a marriage contract.

Pensions & RRSPs – Spouses can agree that their respective pensions and/or RRSPs will be excluded from net family property.

Matrimonial Home – Spouses may wish to exclude the value of the matrimonial home from a party’s net family property, where one spouse brought the home into the marriage.

Specific Property – Spouses can agree that specific property belonging to one or the other, for instance art work or a business, will be excluded from net family property.

Second Marriage – If either spouse has children from a previous relationship, they may have provided for their children in their will to the exclusion of their spouse. Therefore, they would want to eliminate the possibility of the other spouse electing to equalize net family property under the FLA.

Financial Consequences – Spouses may simply decide that there are to be no financial consequences of the marriage and will therefore agree that no spousal support is payable and that they will not equalize net family property on the breakdown of the marriage or on death.

Although a number of issues can be regulated with a marriage contract, there are three specific items which cannot be dealt with:

1. Custody;

2. Access; and

3. Provisions purporting to limit a spouse’s right to possession of the matrimonial home as well as to sell or encumber the matrimonial home without the other spouse’s consent.

In order to be valid, a marriage contract must be in writing, signed by both parties and witnessed. Both parties should disclose important assets, debts and liabilities. Independent legal advice should be sought by each party before signing the agreement.

If you think a marriage contract may be something that you need, please give Nicola Savin or Jacqueline Peeters a call. We would be happy to review your particular situation.