By Emily Gore
If you have decided to get married or start living together, there is reason to be optimistic about the days that lay ahead. In the excitement of planning for this new stage in your life, it is only natural to believe your relationship will last.
What if it doesn’t? If that happens, a prenuptial or cohabitation contract can save time and stress while potentially cutting down on disagreements in what is sure to be a tumultuous chapter in your life.
You may not be able to predict the future but you can still plan to meet the challenges that lay ahead – the good and the bad.
For some couples, the thought of discussing a prenuptial or a cohabitation agreement may be uncomfortable. Still, consider this: if your relationship ends acrimoniously, discussions about such issues as property division and accrued debt can quickly become contentious.
Disagreements can reach the point where you are unable to negotiate a settlement and your issues might need to be settled in court, where litigation can not only add to stress and emotional turmoil to your life but can be expensive.
At Demas Schaefer Family Lawyers, we serve all of Northern Alberta, providing clients with constructive and creative solutions. We can tailor a prenuptial or cohabitation agreement that meets your needs and gives you peace of mind.
Alberta has legislation governing property division
When a relationship has ended, whether it is marriage or cohabitation, couples are entitled to divide their assets and liabilities by agreement as they see fit. However, deciding who keeps what and who is responsible for certain debts may not be a simple task. If a couple cannot reach an equitable agreement and there is no prenuptial or cohabitation contract in place, Alberta has legislation to determine property division.
In January 2020, the Family Property Act (FPA) came into effect, replacing the Matrimonial Property Act (MPA).
The new act states that if you have been living with someone for at least three years or if you cohabit with someone and you share a child, you are considered adult interdependent partners (AIP). Under the Family Property Act, AIPs are entitled to the same rights to property claims as a married couple. That means your former common-law partner may have a legal claim to some assets you believed to be solely yours if your relationship ends. You can also be held responsible for the debt they accrued while you were living together.
Not all property is subject to equal division under the law. The exceptions would include such things as awards or settlements, insurance proceeds, gifts from third parties such as parents, inheritances and property owned by either person prior to when they were married or began living common law.
It should be noted that the MPA still applies to married couples who began living separately and apart before Jan. 1, 2020. All other married partners or adult interdependent partners are governed by the FPA.
The difference between a prenuptial and cohabitation agreement
Prenuptial and cohabitation agreements, or prenups and cohabs, are similar in that they are contracts between two people which govern what happens when a relationship breaks down or one partner dies. It is not necessary to have such an agreement but is highly recommended, particularly if you have been married previously and have children with a former spouse.
A prenuptial agreement is drafted before a marriage and comes into play after the wedding. It can contain terms controlling how property and debt will be divided not only in divorce or separation but at any time during marriage.
To be legally enforceable, a prenup must meet certain formalities. Although you are both agreeing to the contract, you must have independent legal advice and it must be signed separate and apart from each other. Neither person can be under duress and you must exchange sufficient financial disclosure that allows both of you to understand the financial position of each other fully. Terms that are illegal cannot be included.
Like a prenuptial agreement, a cohab is a document that is signed by both people that details the rights and obligations of each should the relationship end.
The FPA allows a couple to decide how to divide their assets and liabilities and there is no law dictating what must be included in a cohabitation or prenuptial contract. However, both people must be aware of what the agreement means. Disclosure is extremely important. Both must be open and honest. For example, if one person is a beneficiary of a trust, they need to share that information with their partner.
If you anticipate the possibility of future marriage, you can contemplate that as part of your cohab and have its terms continue subsequent to a marriage, thus avoiding the need to enter into a new prenuptial contract later.
Circumstances can change
As a young couple starting off together you may not have much in the way of assets worthy of a cohab or prenup. But life is full of surprises, good and bad, and there can be many reasons for having a plan. For example, what if you receive a loan or gift from a family member that is used to make a down payment on a home? If your relationship ends, do you expect to get a bigger share of the profits when the house is sold?
You may have children from a previous relationship when you decide to remarry or move in with someone. It is natural for you to want to preserve your wealth for your first family, including business enterprises. In these cases, a prenuptial or cohabitation contract only makes sense. You may also wish to pass on some of your wealth to your children during your lifetime. To protect that wealth from the spouse of the recipient you may wish to attach a condition to any such gift requiring the recipient and her or his spouse to enter into a cohab or prenup prior to receiving any funds. This allows your wealth to remain in your family in the event the recipient’s marriage or relationship fails.
And young or old, because your circumstances invariably change, it also makes sense that if you do decide to get a prenuptial or cohabitation agreement that you build a review into it so it reflects any new developments.
We are here for you
The end of a relationship can be a devastating and difficult time. It is impossible to know what lies ahead but protecting your future is up to you. A prenuptial or cohabitation agreement can do that by dictating the terms of settlement now, in advance of separation and while you and your spouse are getting along. This can help you avoid significant future legal cost and the emotional turmoil that can be associated with the breakdown of a relationship.
The team members at Demas Schaeffer are experienced in divorce and family law litigation and we have the answers you need. We know there is more than one way to deal with a problem. Contact us today to schedule your free consultation and let us explain your options.