Prenuptial agreements are often associated with wealthy couples, substantial inheritances, or high-profile divorces. In reality, couples in many different financial circumstances may choose to enter into an agreement before getting married.
In British Columbia, what is commonly called a “prenup” may be referred to as a marriage or cohabitation agreement. These agreements can address financial matters that could arise during the relationship or following separation, including the division of property and debt.
Whether an agreement is appropriate depends on the couple, their finances, their plans for the future, and the degree of certainty they want regarding their financial affairs.
What Can a Prenuptial Agreement Address?
A marriage or cohabitation agreement most often sets out how particular assets and debts will be treated in the event of a breakdown in the relationship. Spouses may agree to divide property equally or unequally, exclude certain property from division, or use a different approach to valuing particular assets.
Agreements may also address spousal support, usually by executing a mutual waiver of any spousal support or providing the specific circumstances upon which spousal support would be payable.
Child support, however, is treated differently. Agreements cannot conclusively determine future child support obligations before separation. Similarly, future parenting arrangements for any children, whether they exist at the time the agreement is signed or not, are not addressed either.
People Entering the Relationship with Significant Assets
One common reason for considering a marriage or cohabitation agreement is that one spouse enters the marriage with substantially more assets than the other.
Those assets could include real estate, investments, savings, securities, or other holdings accumulated before the relationship. Although the B.C.’s Family Law Act contains rules concerning excluded property, questions can still arise about increases in value, tracing funds, jointly acquired assets, or how property is managed during the relationship. A written agreement can record what each spouse owns at the beginning of the marriage and establish how particular assets will be treated if the relationship ends.
Business Owners and Entrepreneurs
Business ownership can create additional complexity when spouses separate. A privately held corporation, professional practice, partnership interest, startup, or family business may change substantially in value over time.
A marriage or cohabitation agreement may address how an ownership interest and any increase in its value will be treated. It can also establish agreed approaches to valuation or address whether certain business interests will be included or excluded from family property.
These issues may also affect shareholders, business partners, employees, lenders, or family members who have an interest in preserving business continuity. An agreement can include protections for these stakeholders and predictability for an otherwise unknown outcome.
People Expecting an Inheritance or Family Wealth
Some couples consider an agreement where one spouse expects to inherit substantial assets or has already received significant family wealth. Certain categories of property, including some inheritances and property acquired before the relationship, may already be considered “excluded” from the division of family property under the Family Law Act. However, matters can become more complicated where assets increase in value, are transferred, are invested in jointly owned property, or become mixed with other funds.
An agreement may provide greater clarity about inherited assets, family gifts, trusts, cottages, investment portfolios, or other intergenerational wealth.
Couples Purchasing or Owning Real Estate
The Lower Mainland has some of Canada’s highest residential real estate values, making the treatment of a home a significant consideration for many couples.
One spouse may already own a condominium or house. Parents may have contributed to a down payment. The spouses may purchase a property together while contributing substantially different amounts.
An agreement can document these contributions and establish how the spouses intend to deal with ownership interests, changes in property value, mortgage payments, or sale proceeds if they later separate.
People Entering a Second or Later Marriage
Agreements may also be relevant for people marrying later in life or entering a second or subsequent marriage.
A person may already have significant assets, retirement savings, a pension, a home, or obligations arising from an earlier relationship. They may have children whose anticipated inheritance forms part of their estate planning. Blended families, in particular, often involve financial considerations that differ from those faced by couples marrying for the first time. A parent may want to preserve certain assets for children from a previous relationship while also making financial arrangements for a new spouse. They may also have assets and obligations that need to be preserved pursuant to a court order or separation agreement with their previous spouse.
In these circumstances, an agreement can help establish expectations regarding property and financial obligations between the spouses.
Importantly, marriage or cohabitation agreements form one part of broader financial and estate planning. Wills, beneficiary designations, jointly owned property, and trusts may also need to be considered separately.
Couples With Different Incomes or Career Paths
Marriage and cohabitation agreements are not limited to situations involving existing wealth. Future income and career decisions can also play a role.
One spouse may earn considerably more than the other. One partner may plan to leave the workforce to care for children, relocate for the other spouse’s career, pursue additional education, or contribute unpaid labour to a family business.
Some couples use agreements to establish expectations surrounding property and potential spousal support where their future financial circumstances may differ significantly.
Couples Carrying Significant Debt
Agreements can address liabilities as well as assets. A spouse may enter a marriage with student loans, business debt, tax liabilities, lines of credit, or other obligations. Couples may also have different approaches to borrowing and financial risk.
An agreement can identify debts that existed when the relationship began and set out how the spouses intend to allocate responsibility for existing and future liabilities.
Couples Who Want Greater Financial Certainty
A person does not necessarily need to own a business, expect an inheritance, or have substantial assets to consider a marriage or cohabitation agreement. Some couples view the process as an opportunity to discuss financial expectations before marriage or commencing cohabitation, including saving, investing, home ownership, debt, household expenses, retirement planning, and career decisions.
Preparing an agreement can also require both parties to develop a detailed understanding of their financial position. Full financial disclosure and an understanding of the agreement’s consequences can become important if its enforceability is later challenged.
Why Timing Can Matter
A marriage agreement does not need to be signed immediately before a wedding. A cohabitation agreement does not need to be signed immediately before commencing cohabitation. In B.C., couples may enter into these agreements later during the relationship.
Allowing sufficient time for financial disclosure, discussion, negotiation, and review can give both parties an opportunity to understand what the agreement contains and how it may affect them. The validity and enforceability of the agreement arises from these factors, not whether it was executed before the marriage or cohabitation date.
Because marriage agreements can have significant financial consequences, each spouse should (read: needs to) obtain independent legal advice before signing. This provides crucial strength to the enforceability of the agreement in the event it is later relied on.
An Agreement Is About Planning for the Unexpected
There is no single profile of a person who “should” have a marriage or cohabitation agreement. Some couples consider one because of significant property, businesses, inheritances, children from previous relationships, debt, retirement planning, or substantial differences in income.
For others, the primary objective is predictability. An agreement can give spouses an opportunity to document their financial circumstances and establish expectations while their relationship is intact. In the event of a relationship breakdown, it can provide much-needed stability during the transition process and a simplified path forward.
In short, whether an agreement makes sense and what it should contain depends on the couple’s unique circumstances and the financial and family issues that may affect them.
Contact Meridian Law Group to Speak With a Vancouver Family Lawyer About Marriage or Cohabitation Agreements
Couples considering marriage or planning their financial future may have questions about cohabitation agreements, marriage agreements, property division, excluded property, spousal support, business assets, inheritances, and family wealth under British Columbia family law.
The family lawyers at Meridian Law Group assist clients throughout Vancouver and British Columbia with preparing, reviewing, and negotiating marriage and cohabitation agreements. Whether you are entering a first marriage, forming a blended family, protecting business interests, bringing significant property into a relationship, or considering how B.C.’s family property rules may affect your finances, contact us online or call (604) 913-7465 to discuss the options available to you.
