Most couples understand what a Pre-Nuptial Agreement is, and the benefits it can offer. Many couples also understand that
they can get a Cohabitation Agreement in place when living in a common-law
relationship, and it too can offer some benefits.
Basically, these Agreements let the couple opt out of
various types of family law as they choose.
Couples may decide they want an agreement
like this however they sometimes have no idea what should be in it.
These tpes of Agreements will apply if the couple separate, but also in the event
one of them dies. When asking the “what if” questions, both scenerios have to
be considered.
The first discussion is normally about
assets. Generally, the law says that couples only have to share assets they
acquired during the relationship, including the increase in value of pre-owned
assets. The question for the couple is how much sharing they want to have for
assets they acquire during the relationship.
Do they want to share the increase in value
of pre-owned assets as the law dictates? What about replacement assets, for
example if the wife replaces her pre-owned car with a new car? Is that still
exempt? What if she uses the money from the sale of her pre-owned car to buy a painting?
Is the painting exempt from sharing if the couple separate?
The most extreme type of agreement would say
that there will never be an accounting of assets. If the couple split up, or
one dies, each spouse keeps any assets in their own name regardless of where
the money to purchase it came from. If the couple choose to buy a car or cabin
together, they would put both names on it. Otherwise, it belongs to the named
owner.
Sometimes the spouses would prefer there be
some asset sharing if one of them dies, such as letting the spouse keep the
household contents. These wishes can be in the Agreement and also their wills.
Couples need then to talk about the home they
will live in. If it will be in the name of only one spouse, will the other have
any claim to the home? What if they helped pay the mortgage or put money into
renovations? What if the owner of the house dies? Can the owner of the house
sell it without their partner’s consent? Couples also have to decide how they
will share the bills for the house to make sure the outcome is not unfair.
Most importantly, if the non-owner partner
invests a significant amount of money in the home, this must be addressed in the
agreement.
There are trickier topics like pensions, death benefits, life insurance, naming a beneficiary of investments etc which need to be discussed with the lawyer before the Agreement is prepared.
Some estate planning and new Wills should normally be considered at the same time.
The next big decision relates to spousal
support. Will one spouse be in a position of financial dependency? Should the
door be open for a claim for financial support after separation? After the
death of the spouse with the higher income?
Sometimes couples would like an expiry date
in the agreement. If the relationship lasts a long time, perhaps some spousal
support or assets sharing is appropriate. Or, the agreement might expire after a
child is born to them.
Finally, as any lawyer will tell the clients,
these types of agreements cannot be considered legally binding unless there is
full financial disclosure, and each spouse has independent legal advice.
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