Who Gets the Property?

By Calum Ross

Having personally funded over 5,000 mortgages (over $1.7 billion worth) over my career, I have seen lots of very happy couples, but I also have over 200 separation agreements on file. As a result, dozens of couples have quite literally ruined their finances by squabbling over trivial matters that resulted in both emotional and financial duress.

While some may find the title of this article cynical or offensive, let’s first consider certain factual and statistical data.

Marriage in Canada

According to Statistics Canada (see chart below), divorce rates in Canada were higher than 40% at the end of 2008. This statistic excludes the significant number of unmarried (common law) spouses who separate.

Source: Statistics Canada

With over four in ten marriages ending in divorce, prenuptial agreements (more properly referred to as “marriage contracts” in Ontario) can be worthwhile and valuable tools – not only to protect property and/or income in the event of a marriage breakdown, but also to provide certainty and predictability (and thereby reduce emotional and financial costs) in the unfortunate circumstances of separation. This is the case across the world, and the measures should be taken regardless of where you are, be it where you need to speak to Family lawyers Mayfair or other local firms. If nothing else, marriage contracts can be a prudent, significant part of solid financial and/or estate planning.

Based on data from the Institute of Certified Divorce Financial Analysts, Canada has the fifth highest divorce rate in the Western world — with an estimated 140,000 Canadians divorcing every year. This led me to ask: Why are there so few prenuptial agreements?

According to a study by Harvard Law School, “Why Are There so Few Prenuptial Agreements,” research showed that, “couples may underestimate the value of prenuptial agreements if they fail to understand how prenuptial agreements can help them in the case of divorce. Second, even if couples recognize the potential value of prenuptial agreements, they might underestimate the likelihood of divorce – due to optimism bias – and thus underestimate the expected value of such agreements.”

Perhaps love is blind after all. This is why so many divorcees will seek the guidance of a jacksonville divorce attorney or a Canadian one, all depending on where the couple resides, so they can fight whatever the other is putting down. A pre-nup will be able to help avoid all of the hurt and upset that can come from this.

The Future of Marriage (or if you prefer – The Marriage of the Future)

Despite suggestions by many people that the institution of marriage is too antiquated to survive the test of time, we must also be mindful of the very material changes that have occurred within the modern day family unit. Demographic changes, including greater economic equality between spouses, re-partnering, post-separation, and blended families are some of the dynamics that have led increasing numbers of couples to sign marriage contracts, usually with the assistance and advice of family law lawyers.

Proof of the narrowing economic gap between men and women can be found in a 2013 Maclean’s Magazine article, “Women in Canada embrace higher education: StatsCan,” which reported that: 1) women accounted for 53.7% of all university degree holders in Canada aged 25 to 64, and 2) women aged 25 to 34 accounted for 58% of those graduates with a Master’s degree.

Higher rates of education, at least in part, have contributed to men, and especially women, marrying later in life. It follows that more people are getting married once they have accumulated substantial wealth.

If nothing else, discussions about marriage contracts require couples to discuss sensitive issues (i.e., finances), which they might otherwise avoid or ignore. (By the way – if you think the conversations are hard to have before you get married, as a “marriage alumnus” (read: divorced) – I can assure you these topics don’t get easier to broach with years!)

The Basics of Marriage Contracts

“Pre-nuptial” is actually a misnomer; marriage contracts can be entered into before marriage (usually) as well as during marriage (less common).

Marriage contracts are used to create a legal regime, or set of rules, to govern the division of assets and/or the support to be paid by one spouse to the other upon marriage breakdown (usually separation). This regime will generally differ from that provided by law (in Ontario, the provincial Family Law Act and the federal Divorce Act).

Unmarried spouses can enter into Cohabitation Agreements (prior to or during cohabitation) which, by operation of law, automatically become Marriage Contracts upon marriage. (The rules that apply to unmarried spouses are quite different, particularly in relation to property division – a topic beyond the scope of this article.)

A marriage contract is in some ways a reconciliation of one’s financial plan with that of one’s spouse. In the world of real estate investing, we commonly come across joint venture agreement or partnerships, and in many ways marriage is an agreement to have a silent joint venture partner sitting at the table with you for every deal you do. As the preamble to the Family Law Act states, marriage is a form of “economic partnership.”

Like many joint venture agreements, marriage contracts range from the very simple to the very complex, depending on the parties’ circumstances and the specific deal they want to put in place. Giving proper consideration to the question of “whether or not” one needs such a contract (or whether or not to propose having such an agreement to one’s spouse or spouse to be) is an integral part of proper screening and financial planning – not unlike a life insurance policy – to protect property and/or income, and prevent (or reduce) conflict and cost.

Marriage contracts are most often used to address issues of property division and spousal support upon marriage breakdown – with good reason. According to Michael Kleinman (a top Family Lawyer), “the Ontario Family Law Act prohibits marriage contracts from dealing with custody of or access to children or, for that matter, possessory rights in relation to a “matrimonial home” (a defined term in the Act).” The law does permit a couple to address the education and moral training of their children or any other matter in the settlement of the spouses’ affairs in a marriage contract.

He also adds a few words of caution: section 56(4) of the Family Law Act provides that a court may set aside all or part of a domestic contract on the grounds of (1) non-disclosure of significant assets, debts or liabilities at the time of contracting; (2) failure of a party to understand its nature and consequences; or (3) otherwise in accordance with the law of contracts (in other words, factors such as undue influence, duress and unconscionability may be relevant in the event the validity or enforceability of the contract is challenged at some future point in time).” He further goes on to add that these arguments, or the risk that one spouse will challenge the contract, are reduced by ensuring that both parties receive independent legal advice in relation to the contract.

The Demise of a Marriage

According to the 2014 poll by the Bank of Montreal, 68% of those surveyed say fighting over money would be their top reason for divorce, followed by infidelity (60%) and disagreements about family (36%). In some of these instances, couples or singular people will call for lie detectors uk (or a service in their area) to settle some disputes, putting to rest worries and claims made by one or both of the defendants, however, divorce still does happen despite help. In a society where the family law system has not kept up to changes while the disparity between the “haves” and the “have-nots” is getting increasingly larger, the idea of not having an agreement in place to protect your interests seems like bad financial planning at a very minimum.

I will go one step further and say that anyone you are dating who has any reservations about signing such an agreement should be put under serious scrutiny. After all, if they truly love you for you then the fact they don’t get your money on an early marital exit should be a reasonable ask. You are more than welcome to put a series of clauses that allow for extra consideration if indeed it is, “death that does you part? ” as many marriage vows state. On the other hand, if some other reason causes you to part then, at the very least, according to the BMO study you can take 68% of people’s top reason off the table and prevent your soon-to-be ex-spouse from laughing all the way to the bank.

Calum Ross was ranked as the top producing mortgage broker in the country by Canadian Mortgage Professional Magazine. He holds both a B.Comm and MBA in Finance and recently completed a comprehensive Leadership Program at Harvard Business School. Reach him at: www.calumross.com.