The Best Way to Come Up With a Marriage Contract or Cohabitation Agreement
What is the last thing usually on the minds of happy, loving partners when they decide to marry, or live together?
That is, unless one or both of them have gone down that road before, and been through a nasty separation.
The latest Statistics Canada data tells us that 4 in 10 marriages in Canada end in divorce. While most folks might find this hard to believe, and hope it won’t happen to them, they do not know what the future holds. It is a hard place to go, as a couple, but turning their minds to doing a “pre-nup” – the common term used to reference a pre-nuptial agreement – can avoid huge heartache and expense in the future.
So, what to do, and how to do it?
Firstly, there are two basic types of pre-nuptial agreements used in our laws: for a couple getting married, it is a marriage contract, and for a couple planning to live together in a common-law relationship, it is a cohabitation agreement. A cohabitation agreement can be made “in contemplation of marriage”, and automatically becomes a marriage contract, on the happy wedding day. Both such agreements are recognized in the Ontario Family Law Act as valid, enforceable domestic contracts, and both can be used by either heterosexual or same-sex couples.
The purpose and goal in finalizing such an agreement is to pre-determine the manner in which a couple will deal with their property and finances if or when they separate, to the extent permitted by law, and to avoid conflict between themselves. It is especially important, and strongly advisable, for anyone already owning property before marriage or cohabitation to do an agreement.
Secondly, let’s look at how to do it; there is simply no better way than using a Mediator for this important process. Mediation provides a place in which both persons discuss, and decide together, with the guidance of a skilled Mediator, the content and outcome that they wish to achieve in their own agreement. Not only is there a financial advantage, as both persons will divide the Mediator’s cost between them, but there is also the huge benefit of both feeling more comfortable, engaged, and relaxed in a setting that does not elicit any sense of adversity, or conflict, which they strongly want to avoid at this time in their lives, for obvious reasons. In fact, this is the main reason why the majority of people do not bother with doing an agreement, because they do not want to cause a rift, or upset their partner or fiancé, by even raising the subject. Such potential concerns can be removed through Mediation, and will result in a level of high satisfaction to everyone, not only in the result, but in the manner in which it was achieved together.
That joint achievement can bring other lasting benefits to both persons, as they will have exchanged full financial information, learned more about each other’s views and concerns through a process that encourages and facilitates such an exchange. Very importantly, they will both have also learned from the Mediator about the law, in a neutral, non-confrontational forum, and how it can determine certain outcomes that neither of them would want, or wish upon the other, and which they can replace with their own interests and desires, in their agreement, that would prevail. This will give both of them a sense of being better informed not only in the Mediation process, but also in their lives together in the years ahead, and will remove the worry about not knowing what would happen to their property and finances, if their marriage or partnership ended in the future.
History and Background
There is no doubt that we have recently witnessed a steady rise in the general public’s interest and use of marriage and cohabitation agreements. Marriage and cohabitation agreements were originally recognized in the sweeping statutory changes heralded by the Ontario Family Law Reform Act in 1978. The statutory enactments which originally validated domestic contracts have followed through to Part IV, of the Ontario Family Law Act (hereinafter FLA) as the then Attorney General Roy McMurtry commented on the original purpose of these enactments: “to allow couples to cut their own matrimonial fabric”.
Perhaps some contributing factors explain this steady rise in popularity. Moreover, these features combine with the ever-increasing and solid attraction for ‘mediation’ as the most appropriate method for creating consensus and achieving agreement.
Firstly, let’s be clear about some of the individual characteristics of these two distinctly different types of domestic contract. The distinguishing feature is that a marriage contract applies to a recognized (or intended) marriage of two parties consistent with their contemplated attainment of the legal status as ‘spouse’ within the meaning of Part 1, dealing with family property, under the FLA.
A cohabitation agreement is where the parties are not married, but the agreement may similarly extend to other statutory regimes and case law with respect to their property and/or spousal support arrangements. A properly construed cohabitation agreement will become a marriage contract upon the subsequent marriage of these same parties by operation of law (section 53(2) FLA). Subject to certain statutory and other criteria (e.g., setting aside of a domestic contract) these agreements can modify or discharge rights and obligations as may otherwise be applicable in law.
Essentially, people can choose to carry their own domestic regime from the law-model, which would otherwise arise under statute and case law in the absence of an agreement or contract. In certain areas you can choose “to opt out “; in other words, you can pre-populate your own settlement upon a potential separation (and/or such other triggering event) which would not otherwise apply in the same circumstances but for this valid and subsisting agreement.
From the outset, we should make special note of some overriding provisions which govern substantive restrictions affecting these types of domestic contract. Mediation participants will learn there are some legal subjects that they cannot include in their agreement. Notably, in the area of children, sections 52(1)c and 53(1)c FLA specifically exclude custody and access determinations. This relates to the governing paramountcy of the courts and its inherent parens patria jurisdiction based on the best interests of children. So the attempt to limit the foreseeable jurisdiction of the court particularly with respect to a future parenting plan is out of bounds. Post-separation parenting arrangements are reserved for determination under the context of a separation agreement, pursuant to section 54(d) FLA, or a child-related determination, at that future time, on the merits.
Let’s focus on the further topic of a waiver or release of a future right of shared “possession” of a matrimonial home. An important exclusion is contained in section 52 (2) FLA, stating that any provision in a marriage contract which purports to limit either party’s right to possession of the matrimonial home is unenforceable. This position bears specific reference to the statutory connection with their principal residence during marriage within the purview of Part II, FLA. These legal concepts of “possession” (referencing exclusive possession) and the “matrimonial home” are separate and distinct from property within the meaning of Part I FLA. So, we can deal with property arrangements (e.g. value; fair market value; financing; refinancing; net family property; appraisals; listing on sale arrangements and estates) but not exclusive possession per se, in a marriage contract.
Looking into substantive details, both types of agreements are structured to come into effect upon similar circumstances; often referred to as triggering events these typically include: 1) separation; 2) notice of separation; 3) constructive separation e.g. nursing home; and 4) death of a party, however, people can envisage other foreseeable circumstances, or future dates, which make sense to them in organizing their own arrangements.
To ensure as much as possible that the mediated agreement will prevail, and not be challenged or set aside in the future, there are two important requirements. Firstly, there needs to be full property and financial disclosure made by both persons. This is to avoid any allegation in the future that one person wasn’t made fully aware of the other’s assets, or debts. Secondly (and this one is a bit more touchy): each person should have independent legal advice with respect to the mediated agreement. This is to avoid any allegation in the future that one person was forced or coerced into signing the agreement. The mediator will fully explain to both persons why this is so advisable, and again, it cannot be over-emphasized that this process is the best one for doing so, as both persons will have already actively and jointly engaged in coming up with their own agreement, usually before going to see respective lawyers. At this juncture, it can well be expected that both are pleased with the result and the process used to achieve it and will be motivated to ensure that their agreement will be respected in the future by anyone scrutinizing it. The mediator will have explained that obtaining independent legal advice will be the best shield for both of them to protect against any such scrutiny.
Options other than Mediation
To provide some comparative context, lets look at other process options. One such avenue is directly through the lawyers from start to finish. People have often commented, however, that “it just doesn’t feel right“ within the context of partners planning or pledging a future together. Such persons may very well repel from the sending or receiving of the procedural package of a lawyer’s letter specifying contractual provisions in the shadow of perceived negotiation strengths and weakness. Are you really interested in a distributive discussion with the distinct possibility of walking away from the deal? At the same time, the particular facts and circumstances of some cases may ultimately warrant full legal ownership in an inter-counsel pre-settlement. However, it would be fair to say that this type of complex or complicated case constitutes but a small minority of presenting scenarios.
Another process option is the self-styled cooperative bilateral negotiation without any lawyers, or indeed neutral professionals. In the unlikely event that any and all the statutory prerequisites are complied with, and the inherent challenges of an unassailable pre-nuptial agreement are avoided, this option may work.
Self-help through the Internet does not equate well with self-determination, certainly not as well as through help and guidance by a professionally dedicated (and indeed insured) accredited mediator. If the method in the outcome is meant to be reliable, respectful and cost effective, you may have to reality check your computer’s allure of “something for nothing”. That is why mediation is chosen by so many who “just want to do it right”. In fact, nothing says more about a wise and durable plan that is conscientiously and constructively built by both of you, for both of you, from the initial assessment conducted by a third-party neutral who is duty-bound to do it right by strict adherence to our Code of Conduct in dedicated service to self- determination.
Once again, we return to the central theme of devising your own particular plan that works for both individuals. Aside from some of the statutory restrictions, we can be most creative as we design a process and plan that is your right fit. Such creative potential, and self-empowerment, remain the classic hallmarks of mediation as the preferred process option. Mediation is a balanced, mutually responsive, and informal process that works.
In our experience, it appears as though our classic participants distribute across the spectrum of younger and older individuals, although realism (i.e. the distinct possibility of separation) seems to be a universal trait. On one side we have the younger participants, who for the most part are proactive in their thinking that separation is a relatively common occurrence (i.e. statistically relevant; a by-product of modern living like student debt or increased occupational stress). Easily verifiable statistics suggest that well over a third of younger unions will terminate with or without marriage, or children of the relationship, or marriage. These younger participants (let’s say under the age of 35 years) want to respond to their joint and several interests in creating a pre-nuptial or pre-relational agreement to ensure that there are no misunderstandings in the case that a separation does, in fact, occur. Aided by the Internet in readily available information and shared common concerns, they seek “to do it themselves” and avoid the pitfalls of court intervention. Quite frankly they are skeptical that the powers that be including judges and lawyers and court processing really reflect their values (highlighted by increased information and conflict avoidance).
On the other side of the spectrum we see the older, and in a general sense, the more experienced domestic survivor. This is, the post 45 years individual or second time round participant, who is adamant about not making the same mistake again. He, she or they may have experienced higher conflict, general dysfunction or a downright ‘War of the Roses’. And if they did not actually engage the’ litigation as war’ model themselves, they certainly know someone who found themselves retaking ‘Kramer v Kramer’. Those horrendous cases often included bitter child custody and access disputes, but the lessons learned or otherwise available in our popular culture have them justifiably ‘on the defensive.’
So that is the description of the basic spectrum, however, there are plenty of hybrids and relatively unique individuals who exhibit very particular needs. Also, we have what may be politely referred to as the ‘cheerleaders’, who exercise albeit a caring and concerned constituency. This may be mom and /or dad of a younger person, or scarred sibling, co-workers or more so in the case of the older spectrum, the potential areas of accumulated net worth retention strategy in estate planning.