Why promoting having a pre-nup is so important to me – Nathalie Boutet on Canada AM

What’s a pre-nup?

It is a validly enforceable contract between 2 people which governs how finances will be organized in the event of a separation. If people are not married, we officially call it a cohabitation agreement and if they are married, we officially call it a marriage agreement.

Why promoting having a pre-nup is so important to me:

For me it’s about couples being more prepared for their life together and actually creating their relationship through alignment building rather than leaving their future circumstances to chance.

Before starting a life together, people have a chance to get alignment on how financial issues will be dealt with if there is a breakdown. Without this alignment building process, people miss out on the opportunity to get on the same page when they are in love.

If they have not discussed their finances early on, which is the case in most relationships, over time many people get resentful about several aspects of finances: you spend too much, you spend too little, I want you to work more, you control me too much, etc. etc. These complicated emotions about money frequently lead to separation… If people are nervous about how the law will apply to them in the event of a separation, it makes these emotional reactions about financial issues even more complicated.

So why not get alignment in advance to remove the uncertainty, and why not pave the way for a relationship where conversations about finances are open, discussed and aligned on.

My unique collaborative approach to drafting pre-nups does foster this alignment building process and allows the couple to start on a stronger foundation.

If you don’t have one, how is property and financial support determined after a breakup?

Married couples:
All assets acquired during marriage are separated equally upon a separation. Each do keep what they had before but they share in any increase in value of their pre-marriage assets with the exception of the matrimonial home which gets divided equally regardless of who owned it before the marriage.

What does not have to be shared whether you have a marriage agreement or not is inheritances and gifts from third parties received during the marriage.

As for support, normally if a person finds herself or himself financially disadvantaged at the time of separation, he/she will have an entitlement to spousal support.

We normally don’t deal with children issues in pre-nups.

Common law couples:
The law is not clear at all on what happens if there is a separation. The normal course is that each spouse retains the assets that are in their own name regardless of the duration of the relationship.

It gets complicated if someone made contributions towards the assets of the other because that may give rise to a right to seek compensation for the contribution made towards the asset of the other.

This would happen for example if the house is owned by spouse # 1 and spouse # 2 performs renovations to the house which may have contributed to increasing the market value of the house. Or if spouse # 1 owns a business and spouse # 2 uses their skills to make contributions to the business such as marketing, interior decoration, bookkeeping, etc., without compensation.

In these cases, the onus will be on the non-titled spouse to establish a contribution to the asset of the titled-spouse and to prove what is the value of the work/money they contributed. It gets very complicated and costly.

The laws on spousal support are essentially the same for married and common law couples. If a person finds herself or himself financially disadvantaged at the time of separation, he/she will have an entitlement to spousal support. Except that to qualify for spousal support they had to have cohabited,

    (a) continuously for a period of not less than three years, or
    (b) in a relationship of some permanence, if they are the natural or adoptive parents of a child.

Who should or should not consider a pre-nup:

The following people should consider a cohabitation agreement:

  • A spouse who has clearly more financial wealth than the other and wants to protect the wealth.
  • People who live together but are not married because the laws on division of assets for unmarried couples is extremely complicated and can lead to expensive battles in the event of a breakdown.
  • People who previously went through a difficult separation and want to avoid going through the painful legal process if this new relationship breaks down, by regulating in advance how their financial affairs will be handled if there is a separation.

May not be necessary for the following people:

  • Where the spouses have fairly similar financial wealth.
  • Where the couple find the application of the law fair. For example, for couples who get married, the law allows them to keep most of their pre-marriage assets and to only have to share the increase in the value of their pre-marriage assets. The law also allows people to keep their inheritances received during the marriage. Some spouses think it’s fair to otherwise divide equally the other assets that are accumulated during the marriage.
  • People who are young and just starting out and don’t have any assets they need protected.

Contact Boutet Family Law for information on how you can start transforming your relationship.

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