If you already own a home and are considering marriage, you may be considering obtaining a marriage contract to protect your assets. If you are considering buying a home with your future spouse, and you will be contributing most of the money towards the purchase, you may also be considering a marriage contract (commonly referred to as prenuptial agreements or prenups).
Marriage contracts can be used for a variety of reasons, but they are typically used in the circumstance where one partner has a larger net worth or has a large family estate they would like to see protected in the event of marriage breakdown. Recent case law warns those of you who are in this situation to be careful and be honest when dealing with your partner.
When people decide that they will agree to enter a marriage contract, there is a requirement that this agreement be entered into in good faith. There are disclosure requirements, meaning that you are obligated to tell your partner what you own. The importance of being honest when having these discussions is highlighted in the recent decision of the Court of Appeal, affirming the trial judge’s decision and handed down May 15, 2008. In the facts of the case, the parties signed a marriage contract two days before they were married. At the time the agreement was signed, the party with significantly higher net worth (the husband) did not disclose all of his assets or his income, among other things to his prospective spouse.
This was determined, upon breakdown of the marriage, to mean that
the wife did not know what she was giving up and the contract was
therefore set aside. The wife was awarded 5.3 million dollars; this
result was probably the precise thing that the husband was trying to
protect himself against in the first place.
Make sure that if you want to protect yourself with a marriage
contract, that you bargain in good faith and disclose your income and
your assets. If you don’t, you will risk having the document set aside,
losing the assets you were trying to protect and the money you paid
your lawyer to draft the agreement was wasted.
Rachel Loizos is an associate lawyer at Sotos LLP in Toronto. She practices in the area of real estate law.
June 19, 2008Legal |