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Legal Issues

General information.
What types of agreements are there?
Why should you consider a domestic agreement?

What can be in a domestic agreement?
What can't be in a domestic agreement?
Will the courts uphold our agreement?
How to have a domestic agreement set aside.
Independent legal advice.

The bottom-line on domestic agreements.

General Information
The best time to talk to a family law lawyer is before there are any problems in your relationship. That applies whether you are planning to get married or live common law, or you are already married or in a "marriage like" relationship.

More and more couples recognize this, and are opting to discuss their financial plans, and the expectations of the relationship, beforehand. While you might think this is unromantic, a domestic contract can actually lead to a more solid foundation for your relationship. Instead of simply relying on the love you feel right now to take care of everything, you both enter into the relationship with your eyes wide open, and you develop a plan for your future.

You and your assets are better protected if you have a domestic contract (a marriage contract or cohabitation agreement). Given the high legal fees, and even higher levels of stress involved in a separation or divorce, a domestic contract can benefit just about everyone.

An experienced family law lawyer can help you determine if a domestic contract may be beneficial to you.
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What types of agreements are there?
There are many names used to describe what really amount to the same thing. These terms are:

  • Pre-nuptial agreement (a prenup),
  • Ante-nuptial agreement,
  • Post-nuptial agreement,
  • Marriage contract,
  • Cohabitation agreement.

All of these names refer to an agreement between two parties who live together, regarding financial and other aspects of their relationship. You will commonly hear them referred to as pre-nuptial (before the couple gets married) marriage contracts (the agreement when the couple is married) and cohabitation agreement (where the couple lives together, but is not legally married).

Pre-nuptial agreements, marriage contracts and cohabitation agreement are known more generally as domestic contracts.
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Why should you consider a domestic agreement?
Almost anyone can benefit from having a domestic contract. Here are some specific circumstances why people enter into them:

(a) Certainty in the event of a break up.
The primary reason people enter into a domestic contract is to have some certainty in the event of a break up. You and your spouse (partner) have more control over things instead of leaving it up to a stranger (i.e. a Judge) to decide what will happen. A well thought out and properly drafted agreement can save you thousands of dollars and untold emotional turmoil in the event that you don't stay together.
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(b) For estate planning purposes.
Many people think that domestic contracts are only used in the event of a relationship breakdown. This isn't so. It is also a good idea to have a domestic contract for estate planning purposes.

Without a domestic contract, your spouse or partner may be able to invalidate your estate plan. This results when the family law rights conferred upon your spouse or partner conflicts with the intentions you have expressed in your estate plan. This can prevent your estate from going where you want it to go. This is especially important if you have children from a prior relationship, and you intend to leave some of your estate to them. A domestic contract can ensure that your assets are distributed the way you want them to be when you pass away.

Further, a domestic contract can prevent your estate from being diminished from the expensive litigation bills that come from fighting over it.
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(c) You are living common law.
The laws of property division relating to married couples do not apply to an unmarried couple (his is true for both same-sex and opposite sex couples). In fact, the laws for property division for an unmarried couple are quite uncertain and complex. A cohabitation agreement will provide you and your partner with certainty as to what will happen if your relationship ends.
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(d) You are remarrying.
When you remarry, your legal and financial concerns are often very different than in your previous marriage. You may have children from your former relationship, support obligations, own a home or have other significant assets. A marriage contract can ensure that if you pre-decease your new spouse, your assets are distributed according to your wishes. This can ensure that neither your first family, nor your new family is cut off.
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(e) You are either economically much stronger, or weaker than your partner.
If you are significantly wealthier than your partner, or earn significantly more money, a domestic contract may protect your wealth.

Conversely, a domestic contract may protect you if you are economically weaker than your partner, and you separate or he/she pre-deceases you.
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(f) You own a matrimonial home.
If a marriage ends, normally you get a credit for any assets you brought into the marriage. However, if you are still living in the matrimonial home when the marriage ends, you may not get a credit for it, and the home can be divided between you and your spouse. A marriage contract can prevent this from occurring.
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(g) You own all or part of a business.
Without a marriage contract or cohabitation agreement, when your marriage ends, your spouse could end up owning a share of your business. Your business partners may not want this to happen. A contract can ensure that your spouse does not become an unwanted partner in your business.
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(h) You are foregoing a career due to your relationship.
Sometimes one spouse/partner forgoes a promising career for the sake of the relationship. You can recognize these types of sacrifices in a domestic contract, by including provisions to compensate your spouse/partner for this interruption in his/her career through spousal support.
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(i) One spouse/partner is going to raise the children.
As with forgoing a career, a domestic contract can recognize the value you and your partner want to place on these duties by including provisions to compensate your spouse/partner through spousal support.
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What can be in a domestic agreement?
Generally, a marriage contract or cohabitation agreement can deal with the following:

  • What is the general purpose of your agreement? What is it you are trying to achieve by entering into it?
  • How do you want to divide your property, in the event that you separate? In the event that one of you passes away?
    • Who owns what property?
    • What property did each of you bring into the relationship? (I.e. what property existed on the date of the marriage or co-habitation?)
    • What property is owned jointly and what is owned separately?
    • Do you mean to keep all or some of this property separate? (E.g. a home or business?)
    • Is some of the property to be shared equally?
    • Is there some property that is not to be shared equally?
    • What happens to gifts you give each other? Gifts that someone else gives you?
    • What happens in the event that one of you inherits property?
    • How will the property be valued?
    • How will you resolve property disputes?
  • Whether there will be spousal support obligations?
    • How much (if any) they will be, over what time period they will take place, and will they be a lump sum or regular payments?
  • Who has the right to direct the education and moral training of your children?

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What can't be in a domestic agreement?
There are some limitations domestic contracts. They can't deal with the following:

  • Who gets custody of or has access rights to children?
  • Who should pay child support, how much and for how long?
  • In a marriage contract, who has the right to remain in the matrimonial home; and
  • In a marriage contract, who has the right to sell or transfer the matrimonial home?

As well, a court is permitted to set aside a provision for spousal support if the court believes that it is unjust.
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Will the Courts uphold our agreement?
Many people worry that courts will not enforce domestic contracts. That isn't normally the case. Although courts occasionally do invalidate domestic contracts, these are normally ones prepared without the help of lawyers, or ones where there was coercion (some type of force used) in getting one partner's signature. If you have a properly drafted domestic contract, and there was no duress, it is likely that your pre-nuptial agreement, marriage contract or cohabitation agreement will stand up in court.

The general rule that judges follow is that courts should not interfere with private arrangements entered into voluntarily by two well-educated adults who had legal representation, even in the face of what appears to be an unfair agreement. If a couple agrees on domestic contract, no judge should later impose his or her judgment to suggest that the agreement is inequitable. The only persons in the parties' shoes are the parties themselves, and no one's judgment is better than theirs.
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How to have a domestic agreement set aside.
In certain cases, the court will set aside a domestic contract. Some of the circumstances, which can invalidate a domestic contract, are:

  • If a spouse or partner failed to disclose to the other spouse or partner significant assets or significant debts existing when the contract was made;
  • If a one party did not understand the nature or consequences of the contract; and
  • The normal grounds on which any contract can be invalidated, namely: duress, undue influence, fraud, unconscionability (extreme unfairness), fundamental breach, mistake, etc.

To avoid these possibilities, we recommend:

  • That you and your spouse prepare a net worth statement, and if necessary, obtain valuations for your assets; and
  • That you and your spouse/partner obtain independent legal advice. In other words, each of you should have your own lawyer.

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Independent legal advice
The best way to make sure that your agreement will be upheld is for each of you to get independent legal advice from an experienced family law lawyer.
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What is independent legal advice?
Independent legal advice is just that. Both you and your spouse see different lawyers, independent of each other. The idea is that you will consult with a lawyer, whose concerns are with you and your rights, and not those of your spouse/partner. Your spouse will consult with a different lawyer, who is concerned with his/her rights, and not yours. That way, each of you can know exactly what it is you are agreeing to, before you agree to it.

Your lawyer will review your domestic contract it detail with you, and will give you advice regarding:

  • What you and your spouse/partner intend to accomplish with the domestic contract.
  • What your legal rights would be without a domestic contract.
  • What effect your domestic contract will have on your rights.
  • What, if any, risks you are taking in entering by entering into a domestic contract.
  • Suggesting any amendments to the agreement.
  • If necessary, negotiating these amendments with your spouse/partners lawyer.
  • Ensuring that your spouse/partners lawyer provides a certificate of independent legal advice, to head off any attempt to have the agreement set aside.
  • Answering any questions you may have.

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Why should I get independent legal advice?
Independent legal advice makes it more difficult to invalidate a domestic contract. Without independent legal advice, your spouse could claim that they did not understand what their rights were, what rights they were giving up, etc. In that case, a court may invalidate your agreement.

Or, if you have been asked by your spouse/partner to sign a domestic contract, you will be speaking to a lawyer who is looking out for your rights. Not those of your spouse/partner.
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How important is independent legal advice?
Independent legal advice is powerful. It ensures that the parties entering into a domestic contract are doing so with their eyes wide open. It removes arguments that a party did not understand what it was they were signing. Courts are hesitant to interfere with contracts when the parties made up their mind after having been told about the perils and pitfalls of doing so, and still chose to enter into the contract.
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What's the bottom-line on independent legal advice?
There is no law requiring you to get independent legal advice. A domestic contract can be valid without it. However, if it is challenged, a judge will look more closely at the process by which the prenup was reached than at the actual content of the agreement. Without independent legal advice, your domestic contract is more likely to be invalidated.
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The bottom-line domestic agreements.
A domestic contract can be well worth the time and money you invest in it. Compared to the cost of an average divorce, having a properly prepared domestic contract is a bargain. The best way to think about it is like buying insurance: it's a small one-time cost for something you never hope to use, but if you ever need it, you'll be glad you have it, and it will save you a lot of money.

If you are thinking about getting a domestic contract, call us and speak to a lawyer. He or she will review your financial situation and that of your spouse's and help you determine whether domestic contract would be beneficial for you. We can suggest what should be in your domestic contract, and negotiate on your behalf. An experience family law lawyer can spot all of the issues that need to be covered by your agreement, draft the agreement for you so that you can avoid pitfalls that may result in your agreement being unenforceable.
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