What is a Marriage Contract and Who Needs One in Ontario?

When Can You Create a Marriage Contract?

Before Marriage (Prenuptial Agreement)

A prenuptial agreement is a type of marriage contract that is signed before a couple gets married. In Ontario, this type of agreement allows partners to decide in advance how to divide property, debts, and other financial matters in the event of separation or divorce.

Why Consider a Prenuptial Agreement?

• Protect Individual Assets: If one partner has significant assets (e.g., real estate, investments, a business), a prenup can help protect these assets.
• Clarify Financial Roles: A prenup sets clear expectations about financial responsibilities during the marriage.
• Debt Protection: It can outline who will be responsible for debts acquired before or during the marriage.
• Second Marriages: Those entering a second marriage may want to protect assets for children from a previous relationship.

Important Considerations:

• Full Financial Disclosure: Both parties must fully disclose their assets, debts, and income for the agreement to be valid.
• Independent Legal Advice: Each partner should consult their own Ontario family lawyer to ensure the contract is fair and legally binding.
• Cannot Address Child Custody/Support: Under Ontario law, prenuptial agreements cannot dictate child custody or child support arrangements.

During Marriage (Postnuptial Agreement)

A postnuptial agreement is a marriage contract created after the couple is already married. While similar to a prenuptial agreement in terms of content, it is established during the marriage rather than before.

Why Consider a Postnuptial Agreement?

• Change in Circumstances: If there are significant changes in financial circumstances (e.g., inheritance, starting a business), a postnuptial agreement can help protect those assets.
• Debt Management: One partner may incur substantial debt, and the couple may want to clarify who is responsible for it.
• Marital Issues: Couples experiencing marital challenges might use a postnuptial agreement to resolve financial concerns and strengthen the relationship.
• Protecting Children’s Inheritance: For couples with children from previous relationships, a postnuptial agreement can protect inheritances.

Important Considerations:

• Fairness and Transparency: Both parties must be transparent about their financial situation and agree to fair terms.
• Mutual Consent: A postnuptial agreement must be entered into voluntarily by both spouses.
• Legal Validity: To ensure enforceability, each spouse should seek independent legal advice.

What Can a Marriage Contract Cover in Ontario?

Division of Property and Assets

A marriage contract can clearly define how property, real estate, and investments will be divided if the marriage ends. This can help avoid disputes and ensure each partner’s assets are protected.

Examples of Property and Assets Covered:

• Personal Property: Items such as jewellery, vehicles, or collectibles can be specified as belonging to one partner.
• Real Estate: Ownership of homes, cottages, or other real estate can be protected.
• Investments: Stocks, bonds, RRSPs, and other investments can be designated for individual ownership.
• Business Interests: If one partner owns a business, the contract can outline how the business assets will be handled.

Spousal Support Terms

A marriage contract can outline whether spousal support (alimony) will be paid in the event of a separation or divorce. It can also specify the amount, duration, and conditions under which support will be paid.

Key Considerations for Spousal Support:

• Waiving Support: Couples can agree to waive spousal support entirely.
• Fixed Amounts: Define a fixed amount of support to be paid, regardless of future changes in income.
• Conditions: Specify conditions that would trigger or end spousal support (e.g., remarriage of the recipient).

Debt Responsibility

A marriage contract can clarify how debts will be managed if the relationship ends. This is particularly useful when one partner enters the marriage with significant debt or if new debts are incurred during the marriage.

Examples of Debt Clauses:

• Pre-Marriage Debts: Each partner may remain responsible for debts they brought into the marriage.
• Joint Debts: Outline how joint debts, such as mortgages or loans, will be divided.
• Debt Protection: Protect one partner from being liable for the other partner’s individual debts.

Exclusions

While a marriage contract can cover many financial aspects of a relationship, there are certain matters it cannot address under Ontario law:

• Child Custody: Decisions regarding child custody and access cannot be predetermined in a marriage contract.
• Child Support: Child support obligations are determined based on the Child Support Guidelines and cannot be waived or defined in a marriage contract.
• Unfair or Illegal Terms: Any provisions that are deemed unfair, coercive, or against public policy will not be enforceable.

Who Needs a Marriage Contract in Ontario?

1. Individuals with Significant Assets

If you have substantial wealth, real estate, investments, or valuable personal property, a marriage contract can help ensure these assets are protected in the event of a separation or divorce.

2. Business Owners or Entrepreneurs

Owning a business or being involved in partnerships makes it essential to safeguard your business interests. A marriage contract can specify that the business remains separate property and outline how business assets are treated.

3. Second Marriages or Blended Families

For those entering a second marriage or with blended families, a marriage contract can help clarify financial expectations and protect inheritances for children from previous relationships.

4. People Expecting an Inheritance

If you expect to receive a significant inheritance, a marriage contract can ensure that these inherited assets remain protected and separate from marital property.

5. Couples with Financial Disparity

When there is a significant difference in financial status between partners, a marriage contract can help balance financial responsibilities and ensure that both parties are protected.

Benefits of Having a Marriage Contract

• Asset Protection

A marriage contract helps ensure that personal and family wealth, such as real estate, investments, and inheritances, are safeguarded. This is particularly important for those with significant assets or business interests.

• Financial Clarity

By defining financial responsibilities and expectations, a marriage contract reduces ambiguity. Both partners know exactly how assets and debts will be managed, providing a clear financial framework for the marriage.

• Reducing Conflict

In the event of a separation or divorce, a marriage contract minimizes disputes over asset division, spousal support, and debt management. This can lead to a smoother and less contentious process.

• Peace of Mind

Having a marriage contract in place can strengthen trust and security in the relationship. Both partners can enter the marriage knowing that their financial interests are protected, which can lead to greater confidence in their future together.

How to Create a Legally Valid Marriage Contract in Ontario

1. Full Financial Disclosure

For a marriage contract to be legally binding, both parties must share complete and accurate financial information. This includes details of:

• Assets (e.g., property, investments, bank accounts)
• Liabilities (e.g., debts, loans, mortgages)
• Income sources

Failure to provide full disclosure can render the contract invalid.

2. Independent Legal Advice

Each party should consult their own lawyer to review the terms of the marriage contract. Independent legal advice ensures that:

• Both parties fully understand the contract’s terms and implications.
• Neither party was coerced or pressured into signing.
• The contract is fair and enforceable.

3. Written and Signed Agreement

A marriage contract must be:

• In Writing: Verbal agreements are not legally enforceable.
• Signed by Both Parties: Each partner must willingly sign the contract.
• Witnessed: Having the contract witnessed adds an extra layer of validity.

A properly drafted and signed agreement is essential to ensure the contract will be upheld in court if challenged.

Common Misconceptions About Marriage Contracts

Marriage contracts are only for the wealthy.

Many people believe that marriage contracts are only necessary for individuals with significant wealth or high-value assets. In reality, marriage contracts are beneficial for anyone who wants to clarify financial expectations and protect their interests, regardless of income level. Whether you own a home, have savings, or carry debt, a marriage contract can help ensure fairness and clarity in case of separation.

It means we don’t trust each other.

Some couples avoid marriage contracts because they believe it implies a lack of trust. However, a marriage contract is not about doubting your partner’s intentions. Instead, it’s a proactive way to ensure both partners are on the same page regarding financial responsibilities. Creating a marriage contract can actually strengthen a relationship by fostering open communication and transparency.

Marriage contracts can’t be changed.

It’s a common misconception that once a marriage contract is signed, it cannot be altered. In Ontario, marriage contracts can be amended if both parties agree to the changes. Circumstances can evolve, and updating the contract to reflect new financial situations, inheritances, or family changes ensures it remains fair and relevant.