Canadian Prenups
Prenuptial agreements are gaining popularity in Canada.
Prenuptial agreements are gaining popularity in Canada. In addition, they are regularly enforced by courts. Prior to 1978, prenuptial agreements in Canada were not enforced. However, the 1978 Family Law Reform Act specifically authorized marriage contracts, and they have existed in the country ever since.
Prenups in Canada
Like in most countries, there are some exceptions to prenups in Canada.
The Family Law Act provides that a court may not enforce a provision for support or a waiver of the right to spousal support if…
a. If the provision for support or the waiver of the right to support results in unconscionable circumstances;
b. If the provision for support is in favor of, or the waiver is by or on behalf of, a dependant who qualifies for allowance for support out of public money; or
c. If there is default in the payment of support under the contract or agreement at the time the application is made.
A court can also modify a Canadian prenuptial agreement if enforcing it would create financial hardship to a party.
Here are some examples and caselaw:
Ontario’s Family Law Act permits a court to set aside a prenuptial agreement or any portion thereof if a party failed to disclose significant assets or liabilities, if a party did not understand the nature or consequences of the contract, or otherwise, in accordance with the law of contract. Family Law Act, R.S.O. 1990, Ch. F.3., Sec. 56(4).
Nova Scotia’s Matrimonial Property Act allows for non-enforcement of a prenuptial agreement if any term is “unconscionable, unduly harsh on one party or fraudulent.” Matrimonial Property Act, R.S.N.S. 1989, Ch. 275, Sec. 29.
-Saskatchewan allows a court to redistribute property where an interspousal contract was unconscionable or grossly unfair at the time it was entered into. Family Property Act, S.S. 1997, Ch. F-6.3, Sec. 24(2).
New Brunswick permits a court to disregard a provision of a prenuptial agreement if the spouse did not receive independent legal advice and application of the provision would be inequitable. Marital Property Act, S.N.B. 1980, Ch. M-1.1, Sec. 41.
Read the fine print of the Family Law Act here: olr.org/wp-content/uploads/2018/01/olr_11.1_Tennenhouse.pdf
14 Things to Know About Prenups in Canada
Let’s take a legal journey to the Great White North, the land of maple syrup, snow, and LCBOs. That’s right–the beautiful country of Canada! What’s the deal with prenuptial agreements in Canada, anyway? As a quick refresher, a prenuptial agreement (or “prenup”) is an official contract between two soon-to-be spouses. The contract lists out what happens to assets and debt, the marital home, and whether or not spousal maintenance (a.k.a. alimony) should be paid in the event of a divorce. If you do not get a Canadian prenup, you will be bound to the rules set out in the Divorce Act and the Family Law Act.
Now, let’s dive into the ten things you should know about prenups in Canada.
1. They're sometimes referred to as marriage contracts in Canada
In Ontario, Canada, a prenuptial agreement falls under the umbrella of domestic contracts. There are a few other types of domestic contracts that relate to two partners making an agreement. These include:
- Cohabitation agreements
- Domestic contracts
- Marriage contracts (prenup falls under this one)
- Separation agreements
A cohabitation agreement is exactly what you’d guess–a couple living together but not married may enter into a contract to agree on certain rights and obligations during cohabitation. They can contract with respect to their property, support, the education and moral training of their children (but not custody), and any other matter to settle their affairs.A domestic contract is simply the umbrella term for all of the other types of contracts. Cohabitation agreements, separation agreements, and marriage contracts are all domestic contracts.A marriage contract is when two people create an agreement, either before or during their marriage, in which they agree to different terms of their life, such as property, support, the education and moral training of their kids (not custody), and any other related matter. This is the type of contract that the prenuptial agreement falls under since prenups are made before the marriage. A marriage contract also includes a postnuptial agreement–a contract made during the marriage.A separation agreement is a term for a contract made by a couple that has broken up and now wants to agree on their respective rights, such as property, support, the education and moral training of their kids, the right to child custody, and any other related matter.
2. Prenups are a relatively new concept in Canada
If you were around before 1978 and living in Canada, then you would know that prenups were not enforced by Canadian courts back then. However, after the 1978 Family Law Reform Act passed, authorizing marriage contracts, prenups were given Canadian life! Lucky for you, prenups have gained some traction in Canada and are regularly enforced nowadays.
3. Adding clauses about child custody in your prenup will not be honored by a court
Just like its old pal, the United States, Canadian prenups cannot contract with respect to child custody. Child support is the right of the child, and the child has nothing to do with their parents’ prenup. The government doesn’t want two people contracting years before a potential divorce and deciding what is best for the child when really the child’s best interests should be evaluated and determined at the time of need.
4. You may add clauses about education and moral upbringing in your prenup
That’s right–you can add clauses regarding the education and moral training of your children in your prenuptial agreement in Canada! For example, you can include in your prenup that you plan to raise your children and educate them based on a particular cultural heritage. Another example would be agreeing in your prenup to put your children in private school. You may even include which jurisdiction the children should remain in; for example, if the spouses live in separate jurisdictions, they may want to dictate where the child will reside. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
5. You may add clauses about spousal support in your prenup
Spousal support, sometimes called alimony or maintenance, is when one spouse pays the lower-earning spouse money after a marriage ends. You may add clauses about spousal support, but they must be reasonable. For example, if a court finds them grossly unfair or unconscionable, they may be thrown out. For example, if by honoring the spousal support clause, it would place the lower-earning spouse on government assistance, then the clause will likely be thrown out.
You may waive spousal support altogether (again, unless it is grossly unfair or unconscionable). This says that neither party will be entitled to spousal support from the other. You can also do a partial waiver where only one spouse is no longer entitled to spousal support.
If you want to include spousal support in your prenup, here are some more ways you could write it in (these are not the only ways, but just an idea of what you can do). One way to do it is to include a fixed amount in a lump sum or monthly payment schedule. Keep in mind that lump sum spousal support is not tax-deductible, but monthly spousal support is tax-deductible. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
Another way to do it is to calculate different amounts based on the length of the marriage. For example, if you are married for ten years, they get $10,000. If you are married for 15 years, they get $15,000, and so on and so forth. You could also include spousal support for a specific purpose, such as training or education purposes post-divorce (this would be good if one person was a stay-at-home parent).
You could also exclude certain sources of income for spousal support. For example, if you make money on rental properties, you may want to exclude this stream of income from the spousal support payment. Don’t forget to keep it reasonable; it’s a good idea to avoid excluding too much of your income. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
Another option is leaving out a spousal support clause from your prenup altogether. In this case, the regular rules of spousal support will apply to you. If you’re curious about what spousal support would look like in Canada without a prenup, you can play around with scenarios with this spousal support calculator. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
6. You may add clauses about property division in your prenup
The meat of the prenup is dividing up your property. As long as it’s not grossly unfair or unconscionable, you can divide up your property as you see fit. The following are several ways that people tend to divide their property in prenups.
- Separate property regime. This framework says that you keep your stuff separate, and they keep their stuff separate. Who owns what is determined by what name is on the title.
- Some property is not divisible. This framework says that you will divide everything equally except for certain items. For example, if you want to share everything but that beach house you own.
- Applying another province’s property regime. This framework is often used by immigrants who want to use the property division framework of their hometowns.
- Inheritances and gifts off limits. This property division prenup regime allows you to share everything except for the inheritances and gifts.
- No sharing debts. This option protects you from your partner’s debts. Even without a prenup, you will not be responsible for your partner’s debts, but their debts may affect how much you get in the divorce because the debt lowers their net worth. In the prenup, you can exclude debts from this calculation.
- Protecting a business. This one protects business ownership, whether one of you owns the business or both of you. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
7. You may add clauses about the marital home, with one caveat
The marital home is the home in which you and your spouse lived during the marriage. This is typically most people’s largest asset and most important! Because of this, you may add a clause to your prenup that determines the ownership of the marital home. The caveat here is that you cannot say who will leave the home in the event of divorce or separation.
How can you add the marital home to your prenup? Let’s dive in. You may put the marital home in the same category as all of your other assets (such as cars, valuables, businesses, etc.), or you can make the marital home its own category of the prenup. The following are some ways in which people in Canada tend to deal with their marital homes in their prenups:
- Receiving credit for the marital home. This option is available in Ontario only. You can treat the marital home as an asset and take what you brought into the home. For example, if you went 50/50 on the home, then at the time of the divorce, it should be divided 50/50.
- The marital home is the separate property of one spouse. This simply says that only one person is the owner of the home.
- Attributing interest in the home to each spouse. This option is that you will give one spouse a percentage of the interest based on each year of marriage. For example, one spouse gets a 5% interest in the home every year, up to 50%. This is a great option for stay-at-home spouses.
- Attributing ownership percentages to each spouse. This regime allows for each spouse to have a designated percentage of ownership. For example, one spouse owns 30% of the home, and the other owns 70%.
- Credit for contributions. For this marital home prenup regime, one spouse may own the home, but the other spouse has made significant contributions to the home. For this option, the person making the contributions should keep track of all their contributions in the event of a divorce.
- Division based on contributions. This one is a little bit tricky because you will need to keep documentation from all your contributions, but if you can do that, then you can agree to divide the marital home based on what you both have contributed. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
8. Infidelity clauses in a prenup will likely not be honored
Clauses related to adultery will generally not be honored by a Canadian court. In the Canadian case, D’Andrade v. Schrage, 2011 ONSC 1174, a spouse argued that a marriage contract was void because the other spouse had an affair during the negotiations of said contract. The court rejected this argument and said that the failure of the marriage could not be attributed to one person or the other, and domestic contracts are not meant to deal with the duty to be faithful. Thus, it is likely that your no-cheating clause will not stand in Canada.
9. Full financial disclosure is required for a valid prenup
A prenup must include full financial disclosure. Before you agree with your partner about the property and spousal support, you need to understand your spouse’s full financial picture. Do they have a ton of debt? Do they have a hidden bank account with millions in it? Whatever the case may be, it’s best that you both have the full picture, so you know what you are agreeing to.
Things you have to include in the financial disclosure are income, assets, and debt. These disclosures will then be attached to the prenup itself. In addition, you should also exchange supporting financial documents with your partner to support the accuracy of your disclosure. For example, credit card statements, bank statements, etc. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
10. You cannot use one attorney to represent both people in the prenup
Although this would be very convenient and cheap, both spouses should hire their own attorney to represent themselves. The process usually works like this: both spouses hire an attorney. One of those attorneys writes up the contract and then sends it to the other attorney for review. They exchange edits and changes until there is a final agreement that everyone is okay with.It’s not a good idea for only one of you to have an attorney, as it opens up the possibility of invalidating the prenup. There are three ways a prenup can be invalidated when there is a lack of independent legal advice: (1) one spouse argues that they didn’t understand the agreement, (2) one spouse argues that they didn’t understand their legal rights, and (3) one spouse claims they were pressured into signing the agreement.Both of you should have an attorney, and if one spouse can’t afford it, then the other is free to pay for the attorney. Not ideal, but this is an investment in your future to protect your assets and make sure your prenup is not thrown out. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
11. Get your prenup done early!
Don’t procrastinate here, and try to sign your prenup the day before the wedding. If you wait until the last minute, one spouse may challenge the prenup under the argument of “duress,” meaning they were coerced into signing the agreement too soon before walking down the aisle. They could claim they felt pressured and had no other choice but to sign it. This could lead to your prenup being thrown out based on duress.
So, how early should you have your prenup done? There is no explicit rule in Canada about how long in advance you must sign the prenup, but a good rule of thumb is to get started at least three months before the wedding. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
12. Can I get a witness?
You need a witness to watch you both sign your prenup. This can be any adult of sound mind, such as your mom, dad, sister, brother, best friend, or coworker. The witness doesn’t need to sign the contract but simply must be there to confirm the action. Having a witness helps speak to the identities of the parties signing the contract and that they were of sound mind when signing. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015)
13. Notary not required
When executing your prenuptial agreement, a witness is all you need. Luckily for Canadian residents, a notary is not required in Canada. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015). Unlike in America, where some states require prenups to be notarized.
14. Signatures are required
This is an obvious one, but an important one–you must sign the prenup! It is recommended by Canadian attorneys that you also initial each page of the prenup. (Source: Behrendt, Prenup Essentials: What Canadians Need To Know, 2015).
Conclusion
So, what’s the bottom line? Prenup agreements were once considered to be a sign of a future failed marriage by many people. In Canada, prenups weren’t even allowed until the late 70s. Now, it’s a widely accepted common practice around the globe, and Canadian law now recognizes prenups as marriage contracts! To learn more about Canadian prenups, click here. Feel like you’re ready to get started? You can generate your own prenup today with HelloPrenup–it’s fast, easy, and affordable!
Written in collaboration with Jeffrey Behrendt. He is a highly sought after lawyer with expertise in family law, particularly prenuptial agreements. He is the founder of Behrendt Professional Corporation, the Ottawa law firm behind popular website and resource, Prenup.ca.
Jeffrey graduated with a Juris Doctor Degree from the University of Toronto Faculty of Law in Toronto. He continued his education in England, graduating with Merit in 1998 with a Master of Laws Degree from King’s College London. He was called to the bar in Ontario in 2000.
Jeffrey is the author of the best selling book “Prenup Essentials” as well as several other family law books. His expertise and ability to explain complex legal concepts in easy-to-understand language has been recognized in media circles, with Jeffrey being quoted in the Toronto Star, The Canadian Bar Association’s National Magazine, and Xtra, being interviewed several times on TV, by both CJOH and the New RO, and being interviewed on radio by CJOB and by Peter Warren on CKNW.