COHABITATION and/or PRENUPTIAL AGREEMENTS
The purpose of a Cohabitation or Prenuptial Agreement: Cohabitation and Prenuptial Agreements can be incredibly useful documents to protect both your and your partner’s rights, entitlements, and assets, during and after a relationship. Perhaps even more importantly, they should set out each person’s expectations of the other and allow for peace of mind during a happy relationship. While Cohabitation or Prenuptial Agreements are most commonly entered into in contemplation of a marriage, or before a couple decides to move in together (whether or not there is a possibility of marriage in the future), they can actually be signed at any time. Even if a couple has been married or lived together for a number of years already, it is helpful to have an Agreement in place regarding who will keep what property and what may happen in case of a future separation.
Law in Ontario: In Ontario, when married couples separate, the Family Law Act, grants each spouse an automatic entitlement to half of the combined marital property, regardless of who “owns” that property. The Act also allows both spouses to make a claim for spousal support, which can last indefinitely in some situations. While common law spouses do not share the right to property division, they do have some of the same rights to apply for spousal support as married couples under the Family Law Act.
What can be included in a Cohabitation or Prenuptial Agreement: Cohabitation and Prenuptial Agreements are created to prevent a couple from having to follow the Family Law Act, and other similar laws regarding property division and/or spousal support. They allow for flexibility and self-determination. You and your partner can decide how you want property to be split and if spousal support should be paid to one another. You can also create your own contingencies on when these decisions apply (such as spousal support will only apply if you have a child together), and when (during your relationship or only if it ends). These Cohabitation and Prenuptial Agreements can allow protection of your home, real estate investments, inheritances, pensions, corporations and prevent or compel the payment of spousal support. Cohabitation and prenuptial agreements are incredibly versatile and can be tailored exactly to your needs and desires.
Take spousal support for an example; some couples opt to sign an Agreement where they mutually consent not to seek or obtain spousal support from the other, no matter what happens during their relationship. Other couples may sign a Cohabitation or Prenuptial Agreement where spousal support will only be possible if they remain together for a certain number of years first, or if they have children together. Other still may sign an Agreement where they specify exactly how much spousal support will be paid in the event of a separation. In all of these cases, the signing of a Cohabitation or Prenuptial Agreement provides a guarantee and understanding to both partners about their expectations and obligations in the future.
While many people believe these are only for young families, imagine for instance that one spouse retires and asks their partner to take an early retirement so they can travel together, promising that they will pay for any extra expenses. The partner may be left impoverished if, a few years later, they separate and paying for those extra support stops and they find themselves unable to re-enter the workforce. The Cohabitation Agreement in this case, should have provided a guarantee for the continuation of support from the retired spouse to the partner. This security would have allowed the partner to make an informed decision to retire early, knowing that if things do not work out, they will still be protected financially.
Another important factor in Cohabitation and Prenuptial Agreements to consider is property. What if you own your home, get married and move your spouse into your home? On separation, the Family Law Act says you have to divide the equity in your home 50/50, even though you were the one who bought the home, paid the mortgage, and ensured its upkeep for years, long before you met your spouse. Or, your spouse can have you removed from your home while you wait for a trial at Court to resolve all of your issues. Signing a Cohabitation Agreement could guarantee that your partner could not make any type of claim in the equity of your home by virtue of the common law and trust arguments if you separate. Signing a Prenuptial Agreement, could guarantee that the amount you invested in your home before the marriage would remain yours if you separate in the future. These types of Agreements allow you and your spouse to decide how, if at all, to divide your property if you separate.
Other Benefits of a Cohabitation or Prenuptial Agreement: While contemplating a possible future separation may not be the most romantic thing in the world, it may actually be the best thing that you and your partner can do for your futures. Having a solid Agreement in place will allow you both peace of mind. You will have shared what your expectations are of one another and the relationship to ensure you are “on the same page”, and will have a clear plan in the event of a separation. Think of these Agreements as “relationship insurance”. And, if you cannot agree on the terms of your separation while you are happy and in love, imagine how much more difficult it will be if the love is gone and one or both of you is angry!
Caution: One note of caution, not every aspect of a separation can be planned and contained in a written Agreement. It is very important to get legal advice to make sure that your Cohabitation/Prenuptial Agreement is effective and binding long-term.
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