A Primer on Marriage Contracts
A marriage contract is a legally binding document entered into prior to or during the marriage. The contract regulates the division of property and ownership of assets in the event of divorce or separation. The intention of this contract is to ensure the parties do not have to concern themselves with lengthy and expensive litigation should they decide to end the marriage.
The contract will typically be drafted by lawyers for both parties after having had a full and frank discussion. Both parties have the opportunity to fully disclose their assets and debts, enabling the contract to be accurately written and reflective of their intentions . Either party may apply to the Court to amend the contract should circumstances change.
It is critical to understand that a marriage contract is not an alternative to a divorce. A marriage contract does not constitute a dissolution of the marriage and will not affect ownership of property until a divorce is granted. A contract may be formally drawn up, but in the event the parties reconcile, the Court will approve the reconciliation order regardless.
As with all legal contracts, a marriage contract is final and cannot be revoked or replaced unless by mutual consent of the parties.
Essential Elements of a Marriage Contract
Financial Arrangements: Financial agreements must set out how much money each spouse earns and how financial and other accounts, such as bank accounts, loans, and credit cards, will be handled. Property Division: A marriage contract should address how all assets (investment, real estate, etc.), debts, and pensions will be divided in the event the marriage is dissolved. Ontario law requires that spouses divide any property that increased in value during the course of the marriage. Spousal Support: Contracts should outline any spousal support terms as well as what will happen in the event a spouse remarries or cohabitates with another person. Guardianship: Details around child guardianship and maintenance should be included. Canada does not recognize prenuptial agreements, but Ontario does recognize the right of both parties to choose whether to disclose financial details about their earnings.
Advantages of a Marriage Contract
When navigating the emotional and often turbulent waters of a marriage, a marriage contract can provide a crucial lifeline. Known in some jurisdictions as a premarital or prenuptial agreement, these contracts offer benefits that can protect both parties in the event of a divorce or separation.
One of the primary advantages of signing a marriage contract is financial security. Through the contract, spouses can determine in advance how property will be divided and what spousal support may be owed should the marriage come to an end. This security can be particularly important for individuals who have accumulated wealth prior to the marriage, or those who own businesses that they wish to protect from potential claims of the other spouse.
In addition to financial matters, a marriage contract can also provide clarity for both spouses. By clearly outlining expectations and requirements, parties may avoid confusion and disagreements about important issues. For example, if a couple has children from previous marriages, the contract can identify rights and responsibilities related to custodial decisions, education costs, and more.
Furthermore, having a marriage contract can prevent conflict. In the unfortunate event of a divorce, having the terms outlined in a marriage contract can simplify and expedite the process of property division, as well as reduce the likelihood of litigation. The ability to enforce a pre-existing contract can also reduce the emotional strain that comes with renegotiating terms.
Overall, a marriage contract can be beneficial for both spouses. By providing financial security, clarity, and conflict prevention, the contract can not only boost confidence at the time of marriage, but also help prevent heartache down the road.
Myths and Truths Surrounding Marriage Contracts
A marriage contract is a legally binding agreement entered into during a marriage to set out the rights and obligations of each party in relation to, for example, property and/or support entitlement should the relationship end and/or one of the parties die. No matter how banal the terms of a marriage contract, it is still a contract that continues in effect, and each spouse or common-law partner may be sued on it like any other legally binding contract.
It is important to understand that a marriage contract may deal with the following issues, including but not limited to: It is a common misconception that marriage contracts are only for the wealthy or for those who wish to avoid financial responsibilities after their marriage ends. Nothing can be further from the truth. Every spouse – regardless of age or financial position – has the ability to direct how his or her assets and legal obligations will be dealt with should the relationship end. In fact, by avoiding such discussions, a spouse could find himself/herself arbitrarily tied to his/her partner’s debts, and without the ability to readily disentangle oneself from such debt. This would be particularly problematic where you do not have a sufficient income to support yourself and repay your spouse’s debt. This is the very reason that a marriage contract should be considered. Another misunderstanding about marriage contracts is that they imply that you do not trust your partner. The reality is that entering into a marriage contract actually means that you trust your partner enough to believe that you can have frank discussions about how you want to divide your assets and obligations, and you are both willing to make mutually beneficial arrangements. It shows a strong and rational partnership.
Examples and Samples of Marriage Contracts
The following contract templates are designed to assist in the drafting of a marriage contract. These templates are for information purposes only and are not legally binding. A signed contract authenticated by a lawyer would have legal effect.
Version 1
Marriage Contract
Made this ___ day of ___
BETWEEN,
Husband____ after called "the Husband"
AND
Wife____ after called "the Wife"
WITNESSETH as follows:
- The parties – husband and wife – agree to the following:
- 1 Both have come to this marriage contract of their own free will and without coercion from any other persons.
- 2 Any property owned, or to be owned, before, during or after the marriage remains the separate property of the wisest and the parties agree the children will have rights to the wisest estate as outlined below:
- a right to reside in the family home until the age of 18 or until they are no longer a dependent.
- a right to live for free in the family home if the wisest wants the home, until the eldest child ceases to be a dependent.
- an equal share in the distribution of the net wealth if the wisest files for divorce or death.
- 3 The wisest will pay their share of bills and maintenance costs throughout the marriage but only during the marriage, they will continue to pay the bills if they cannot be agreed upon for 3 or more months.
- 4 The wisest will fully support the dependent children of the marriage and maintain their standard of living throughout the marriage, if they separate they will continue to provide housing and food for the children until the age of 18 or until they are no longer dependents.
- 5 Upon separation the dependent children of the marriage will receive a share of their net wealth that is proportional to their respective age of the child.
- 6 Upon separation, considering both parties will contribute to the household and both work outside the home, domestic responsibilities will be split equally, the husband taking care of house and garden and the wife taking care of meals and entertainment.
- 7 That the wisest agree to have one child for health reasons.
Version 2
Marriage Contract
Made this ___ day of ___
BETWEEN,
Husband____ after called "the Husband"
AND
Wife____ after called "the Wife"
WITNESSETH as follows:
- The parties – husband and wife – agree to the following:
- 1 Wife shall retain sole ownership of any property owned prior to the marriage and any property obtained during the marriage.
- 2 If there are any children of the marriage, such children shall not have any right to share in the wife’s property, but shall have rights to share in inheritance should the wife choose to leave such property to them.
- 3 The husband waives the right to any property of the wife’s, including those that are jointly owned.
- 4 If the husband owns a house, the wife shall have no right to any share of the house.
- 5 The wife shall support the household prior to and after the marriage, and shall contribute to the marital funds without expectation of immediate return.
- 6 The husband shall contribute to the marital funds in the same manner as the wife, if he holds a job outside the house.
- 7 If no such job is held by the husband, then he shall be responsible for keeping the house maintained and looking after any household expenses, in lieu of contributions to the marital funds.
Legal Ramifications and State-Specific Nuances
It is important to know that the enforceability of a written marriage contract will depend in part on what state the couple is in, as all contracts must be enforceable under the governing law of the state. For instance, some states require both parties to have independent counsel during the negotiation process so the agreement is valid. Certain states may also require a minimum and/or maximum amount of time to pass before divorcing in order for a written agreement to be enforceable, since the agreement concerns rights that are inherent of marriage . Many states will enforce contractual terms made before marriage that govern how income accrued and liabilities incurred during marriage will be distributed in the event of divorce. Often this will mean that contractual terms will be enforceable if they provide consideration to one party, even if it is not explicitly written that the parties intend or agree to them being enforceable. For example, if neither party is interested in prenuptial agreements, but the couple buys two homes together during the course of their marriage, then it is likely the home agreement will be enforceable in that it offers rights that were originally relinquished when the demand for a prenuptial agreement was made.
Talking to Your Soon-to-Be Spouse About a Marriage Contract
In writing this post, I wanted to provide you with some context that will be helpful to you as you read this post and also when you’re sitting down to read a marriage contract with your future spouse or partner.
Essentially, I want to help you understand how to open the dialogue with your partner. Many readers of my blog will start googling "marriage contract" and maybe find this blog and read this blog post and think "ah-ha, this is a contract that works for us." And then they’ll go directly and try to have some kind of conversation with their partner about that.
But do not do that, because this is not a website where you can just take the contract and hand it to your partner. Unless you have that relationship with your partner where both of you would find that normal in terms of how you talk about important, sensitive, complex issues, that is not how to introduce the topic.
The way that you want to introduce the topic, is that you start by saying: "When we get married, we need to talk about the expectations of being married. We need to talk about finances, we need to talk about what happens if we split up, we need to talk about how we’re going to manage our family life, we need to talk about what happens if there’s an affair."
Then the next thing that you say is. "I came across this website and there’s a question here that says what is a marriage contract? And I was curious what your reaction would be to that. What do you think about the idea of having a contract that outlines those expectations?"
And then you will both have an discussion about whether that’s something that you’re willing to have. Because a contract is a serious matter. It is an important document. It is a legally binding document. And seeing the contract and reading it, you may feel very differently.
It’s quite common for people to say, "wow, I don’t like how that sounds. I’m not sure I’m interested in marriage anymore, or maybe I need to go consider marriage therapy." Or, you might get the opposite reaction or the reaction might be, "wow, I love that idea. And I’d like to build a custom marriage contract that really reflects our values and what we want."
Then you want to talk about some place where both of you feel comfortable continuing the conversation. So it may be a restaurant, it may be a therapist’s office, it may be in your backyard. Whether that goes well or not is a different post.
But I want you to really be mindful of how you approach the topic. Because you don’t want to put your partner on the defensive. You want the conversation to be constructive. And you want to move it forward.
When to Call in a Lawyer to Draft a Marriage Contract
The NZLS recommends that all parties to a marriage contract be represented by a legal adviser. Typically, an agreement will not be valid unless it has been signed in front of an independent witness and certain other requirements are complied with. The Family Courts have held that this means before signing, a party must have legal advice which includes the important information about the legal meaning and effect of the contract and the advantages and disadvantages to that party of the contract.
Other issues that a lawyer will address include:
• ensuring that all parties have complete and accurate information regarding each party’s financial position
• advising on the specific terms of the proposed contract and checking whether those terms are unduly harsh or unfair
• ensuring that the party’s interests are protected in relation to the contract
• advising on any terms that should be amended or removed and on whether there should be a suggestion of independent legal advice
If the contract is not fair or reasonable, a spouse may not be required to comply with it. However, the court may exercise their discretion to enforce it, particularly if amendments or a variation are considered to be just and equitable in all circumstances.
If one of the parties does not have legal representation, or has had little respect for the value of obtaining it, then a marriage contract is likely to be viewed by the court quite differently.
Amending or Updating a Marriage Contract
Marriage contracts are typically signed prior to marriage. However, as your life evolves so too might the terms of your marriage contract. As a result, a marriage contract should be reviewed periodically for any necessary updates (including during your marriage) especially after you have a child or if there has been a change in income. In fact, you may wish to review your marriage contract if a significant change occurs such as one of you receiving a promotion or a job transfer, or perhaps for an inheritance, sale, or transfer of a piece of real estate for which you received a significant equity payout. A significant change in your financial circumstances may or may not require an update to your marriage contract, which depend on the words of your marriage contract. In other words, even after signing, you may have flexibility to rearrange your spousal support provisions so that it does not necessarily have to change with each pay raise, for instance. The key is to ensure that your marriage contract reflects the parties’ true intentions at all times; if the intention is to limit the possibility of variation, then the court will find ways to enforce the limits you have agreed to.
There are generally three ways in which a marriage contract may be amended (or also called an "amending agreement"):
- Amendment by consent
- Amendment by the court
- Amendment by operation of law
If you agree, you can amend your contract by simply re-writing it. Keep in mind that this amendment will not be effective until it is executed . If you wish to amend your marriage contract with the court intervening and making any changes, you will have to convince the court that the agreement does not reflect the parties true intentions. As set out below, a significant change in circumstances is not always necessary to have a marriage contract amended. The other party must be given notice of the application to the court to have the marriage contract amended. If you cannot get agreement from your spouse, you can bring your application to court to have the agreement amended. However, the parties can only change segments of an agreement for one issue at a time – and you cannot un-do other segments of the agreement. Thus, the specific segment you would like changed will take effect only after the judge orders it.
An example of how a marriage contract may require updating is if there has been a significant change in circumstances, the court may modify or override the entitlement to spousal support provided that the change of circumstances is significantly different from what was at the time of signing the agreement. An example of a significant change in circumstances may be an early retirement, losing a job, or if one of the parties is unable to work due to an illness or disability. A general change in circumstance is not enough; the change must be significant. If you are able to prove to the court that there is a significant change in circumstances, the court may vary the spousal support or other provisions of the agreement to make the intent clear.