If you are one of the many people who got engaged over the holidays, a new year brings with it new beginnings.
Marriage is exciting and should be one of the happiest times in life.
The reality is, however, that marriage brings a lot of financial responsibility to your partner. Many people don’t think about those realities when they “pop the question” or “say yes.” But everyone should.
While marriage is supposed to be until death do you part, they do sometimes end. Most of us think about preparing a will in case one partner dies. Very few people think about making a plan with their partner in the event the union ends.
Taking some time to figure out what you want done with your assets and income streams in the event of a breakdown in the marriage is something we should all think about.
A marriage contract (often referred to as a pre-nup or a post-nup) can deal with virtually anything, other than which parent will care for the children and make the decisions about their upbringing. Most people with whom I talk do not have a good understanding of the financial implications of a marriage, nor do they know how to address those issues after the fact. Many are very fearful about the future.
Some examples of these implications are:
- Married spouses have an automatic entitlement to seek spousal support from each other, regardless of how long the marriage lasted (unlike common law spouses, who have to live together a minimum of three years, or have a child together);
- Married spouses are entitled to an equalization payment with respect to the assets accumulated during the marriage. An equalization payment is a payment made by one spouse to the other, to “equalize” the respective net worths of each spouse accumulated during the marriage. So if one spouse accumulated $200,000 of wealth during the marriage and the other accumulated $400,000 of wealth during the marriage, the latter has to pay their partner $100,000 in order to “equalize” their respective accumulation of wealth to each walk away with $300,000;
- When a married spouse brings a home into the marriage, and the parties live in that home, he or she will not get any credit for having brought that asset into the marriage if it is still the matrimonial home at the time of separation;
- Both married spouses also have a right to continue living in the matrimonial home after a separation, even if one spouse is not on legal title. There’s simply no “throwing out” of your ex’s stuff onto the front lawn (in Ontario);
- If you have a business, that business can be affected by a divorce, particularly as a result of the equalization of property scheme in Ontario. You may need to liquidate some business assets to afford an equalization payment;
- If you are the beneficiary of a trust, that too can be a significant issue in the context of a separation because the accumulation of wealth in a trust is also often subject to equalization; and
- If this is a second marriage for you where you have pre-existing financial commitments to your former spouse and or children, you may find yourself in a situation where you cannot afford to meet those obligations as well as your obligations to your subsequent spouse.
These are but a sprinkling of reasons why anyone thinking about getting married should consider entering into a marriage contract. It will certainly help you separate (should that have to happen) in a much more controlled and financially appropriate manner (and it will usually save you lots in legal fees down the road!).
While I certainly do not wish for anyone’s marriage to end, the reality is that they do.
As someone who has practised family law for many years, I see the stress that everyone goes through, particularly from the financial uncertainty of how things will turn out. This kind of stress often turns what could otherwise be an amicable separation extremely acrimonious.
A proper marriage contract can help you preserve some certainty in your life, and preserve a relationship with your former spouse well into the future. This becomes all the more important if you have children together.
If you have any questions or would like to learn more, contact our Family Law Group.