Prenuptial and Cohabitation Agreements
If you have substantial assets, a corporation that you wish to protect, want to ensure that you estate goes to children from a prior marriage, or simply want to protect the assets you are bringing into a relationship and/or the assets you anticipate acquiring after you are married or start living together, you will want to have a prenuptial or cohabitation contract in place.
Cohabitation agreements now have even more significant importance since the legislation addressing the distribution of property on the breakdown of a relationship changed on January 1, 2020. Since then, even if you do not marry but fall under the category of adult interdependent partners you may be at risk of having your property divided – even property that is in your sole name that your partner did not contribute to in any way. We are here to help counsel you and draft documents that will have the effect of preserving property you do not otherwise intend to share with your spouse/partner on the breakdown of your relationship.
What is a prenuptial agreement?
A prenuptial agreement or prenup is a contract between two people that is entered into prior to their marriage. A prenup is legally enforceable provided it meets the following legal formalities:
- Sufficient financial disclosure has been exchanged to allow each party to fully understand the estate and financial position of the other;
- The contract is in writing;
- Independent legal advice has been given to each party;
- The contract is signed separate and apart from the other party after receiving independent legal advice; and
- Neither party is under any duress.
The intention of a prenup is to set out what happens when/if the marriage breaks down. A prenup can deal with property, spousal support, and parenting issues. If you have substantial assets, have children you wish to ensure receive the bulk of your estate, own a business or have already been divorced, then a prenup is usually a good idea.
What is a cohabitation agreement?
A cohabitation agreement or cohab serves the same purpose as a prenup – it is a contract between two people who are not married or getting married which governs what happens when/if their relationship breaks down.
What is the law surrounding prenup and cohab agreements?
There is no legislation that dictates what terms must be included in prenups or cohabs. The Family Property Act does allow for individuals to enter into contracts that dictate how property will be divided and distributed on the breakdown of a marriage or relationship. This allows anyone to opt out of the Family Property Act as long as the parties enter into a contract that meets the formal requirements under section 38 of the Family Property Act:
- The parties must be aware of the nature and effect of the agreement;
- The parties must be aware of any future claims that they may have under the Family Property Act and they must give up those claims (i.e. they must have a full appreciation of the estate and financial circumstances of the other party);
- The agreement must be in writing;
- The agreement must be executed freely and voluntarily and not in the presence of the other party;
- The agreement and acknowledgements must be signed and made in front of a lawyer after the lawyer has provided legal advice independent of the other party; and
- Neither party can be under any duress.
Are you concerned about protecting your property from a potential spouse or adult interdependent partner? The Family Property Act allows individuals to enter into a contract that dictates how your property will be distributed on the breakdown of the relationship, regardless of whether the contractual terms follow the legislated terms set out in the Family Property Act. If you have more wealth and/or a higher earning capacity than your spouse/partner, and you wish to have protection from the equal sharing of wealth, do not allow the terms of the Family Law Act to dictate how property you have accumulated is distributed.
Another common situation is where you wish to gift significant wealth to married children or you are entering into a second marriage and wish to preserve your wealth for the benefit of the members of your first family. In these cases a prenuptial or cohabitation contract may be important for you. It is very important to be aware that the law relating to the distribution of the property of unmarried couples changed substantially as of January 1, 2020. If you are not married but are adult interdependent partners and you separated after January 1, 2020 then the distribution of your property will be made as if you were married unless you have a cohabitation agreement. Contact us today and we will assist you by preparing the necessary documents to protect you and remove the risk of unanticipatedly losing some of your wealth.