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Marriage Contracts: or Don’t Set Up Home Without One

by Michael A. Mann for Canadian MoneySaver Magazine

This article was written by Michael A. Mann as one of his regular contributions to the Canadian MoneySaver magazine.

At the heart of every strong marriage is natural love and affection. No wonder wedding preparations don’t often include a visit to the lawyer’s office – what could be less romantic! However, there is no reason that people can’t be romantic and sensible at the same time. A marriage contract can be the least expensive “insurance” you can find when it comes to planning for you (and your family’s) future.

A Contract, But with a Difference

A marriage contract is very simply an agreement signed by the Husband and Wife either before or during marriage. But it is private, intensely personal and entirely future-oriented. It looks ahead from a time when neither one knows much about the intimate financial affairs of the other. It serves to clarify expectations — so both partners know where they stand. This can be especially important in second marriage situations where there are children to be considered, a home or other assets accumulated before marriage, inheritance expected, or businesses operated.

Tailor-made, Not Off the Rack

Each bride and groom has a special and unique background which is joined at marriage. A contract must respond to those elements. Sometimes, both parties are (and will continue to be) financially independent. For those couples and their families it may be reassuring to exclude the prospect of paying support to the other on separation or death. Another couple may find it very upsetting to try to agree on support in a predetermined amount payable at some unknown time in the future, if at all. For them, a contract should avoid dealing with support altogether.

Most often, property matters are dealt with in the contract. Where one person owns a home before marriage, how will it be dealt with once it becomes the new matrimonial home? What if one spouse sells their home to move in with the other? Don’t forget the children and their expectations of fairness. And what about the new wife’s interest in that family owned motel!

With careful planning, the expectations of both the wife and the husband can be met in what negotiators call a “win-win” situation.

And If I Don’t Sign?

Knowing how the law will apply is the first step in deciding whether a contract is needed. The Family Law Act (FLA) sets out one’s rights to property and support on separation, and the Succession Law Reform Act provides that on the death of a spouse, if the survivor is unhappy with the provisions of the will, he or she can elect to claim under the FLA as if there was a separation on the day before death.

The scheme of the FLA is to require an “equalization of assets” between husband and wife on separation, recognizing marriage as an equal, long term partnership. For example the matrimonial home is presumed to be half-owned by each spouse, regardless of who’s name is on the deed, and regardless of who paid for it. The value of other things brought into the marriage by either spouse is credited back to that person on separation, but any increase in value will be a matrimonial asset. An increasing asset, such as land, RRSP’s or a business will benefit the new partner as well as the owner spouse. Debts incurred by one spouse during the marriage will effectively become the debts of both, regardless of who incurred them, since they will reduce the asset total.

The law was designed to apply generally to everybody. It is for those special circumstances that require a different arrangement that a contract is needed.

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