It is no secret that family law disputes resolved using the court process come at great personal and financial expense. Being proactive with the use of domestic contracts ensures that both your family and business assets are better protected from costly legal disputes.
Unfortunately, there is great stigma against pre-nuptial agreements because people believe they are unromantic. The reality is that marriage and cohabitation are legal acts with legal consequences should the relationship breakdown. Without an agreement, the federal and provincial laws will determine what happens if you separate. It is important to understand that you sign a domestic contract with the hope that you will never need it, but knowing that if you do, both parties will benefit from having one. The same way a Will prepares you for the worst possible outcome, a domestic contract prepares for a relationship breakdown, all the while hoping it will not be required.
The term “pre-nup” is not used in New Brunswick, but the concept is the same. Couples can set out their agreements on what would happen should they separate and divorce. These types of agreements are referred to as “domestic contracts” and they can include marriage contracts, cohabitation agreements, and separation agreements.
Marriage contracts and cohabitation agreements are especially helpful when one, or both, spouses have accumulated assets over which they wish to retain control in the event of a separation. These assets can include anything from real estate, to pension benefits, accumulated savings and/or investments. These agreements can also cover responsibility for debts, which is usually to the benefit of both parties. Business assets can also be protected in a domestic contract, which though potentially excluded from division on separation or divorce, are at risk without an agreement.
Domestic contracts can protect both spouses, and are not just for people with extensive wealth. These agreements can be drafted to meet your particular needs and the needs of your family.
Marriage Contracts
Marriage contracts can be signed before or during marriage. In a marriage contract, both parties agree on their respective rights and obligations during the marriage and upon separation. This typically includes ownership or division of property, and spousal support obligations. These contracts cannot include agreements on parenting or child support, as that would not align with the standard of “best interests of the child.” Marriage contracts allow you and your partner to decide what is fair should you separate. Without one, the law will decide for you and you will be required to follow the provincial Marital Property Act, and the federal Divorce Act.
Cohabitation Agreements
Cohabitation agreements are domestic contracts for couples who live together but remain unmarried. These agreements can cover the same things that a marriage contract does, and if the parties do eventually marry, the cohabitation agreement can be deemed to be a marriage contract. Cohabitation agreements are particularly helpful to solidify a “what’s mine is mine, and what’s yours is yours” approach to property ownership. They can also be helpful to avoid potential spousal support claims should you separate. For example, in New Brunswick support obligations can arise after living together for 3 years, or if you cohabit and have a child together. Cohabitation Agreements allow you and your partner to decide what is fair should you separate. Without one, the law will decide for you.
Separation Agreements
Separation agreements cover all the same things that marriage contracts and cohabitation agreements do, except they are made in settlement of a separation and therefore are only made once you have separated. Because they are made at the time of separation, these agreements can include provisions with respect to child support and parenting time of children. Separation agreements can be used as the basis for a divorce.
Domestic contracts are a preventative measure you can take to protect yourself and your business. They will save you personal and financial stress in the future.
Many people opt to write their own domestic contract without the assistance of a lawyer. The danger of doing so is that should either party change their mind on the terms of the agreement, the Court has the ability to disregard any provision of the agreement on the basis that the spouse did not receive legal advice. If the contract is found to be inequitable, it could ultimately be unenforceable. Both spouses should receive independent legal advice during the drafting of the contract, and before signing. This will strengthen the agreement and decrease the risk of issues later on.
Another important factor to any domestic contract is financial disclosure. Without it, the strength and enforceability of the agreement can be easily questioned or even over turned. It is in everyone’s best interest to have a full financial picture when signing an agreement.
Agreements must also be in substantial compliance with the law, specifically the Divorce Act, where parties are married. If the agreement is not in compliance with the terms of the Divorce Act, it can be overturned and found to be inequitable and unenforceable.
Domestic contracts are never completely perfect. The possibility that they can be overturned is always a risk. That is why it is vital to consult with a lawyer. Spouses who have had the written intention to make agreements and received legal advice when doing so, end up with stronger contracts which are more likely to withstand scrutiny.
The best approach to preserve your family assets and business is to take the proactive step of having a domestic contract prepared. Consult a member of Cox & Palmer’s family law team to determine which type of agreement best suits the needs of you and your family.
In a recent article, (In New Brunswick, When Do You Become “Common-Law”?), we discussed how long it takes to become common-law in New Brunswick. In that article, we mentioned that common-law couples do not have the same rights as married couples, and there is no presumption of equal division of property on separation. However, you […]
read moreThese days, almost every couple lives together for a period of time before they get married, and more and more couples are deciding to never get married at all. We get a lot of questions about common-law status, such as how long does it take to become “common-law”, what does it mean, and do we […]
read moreAnderson v. Anderson, 2023 SCC 13 Judge: Justice Karakatsanis Subject Matter: Absence of Legal Advice when Entering Domestic Agreements The parties were married for three years. They had both been married previously, and each entered the marriage with significant assets. They separated and signed a domestic agreement without disclosing their individual finances or seeking independent […]
read more
