Thinking of Getting Married? Maybe You Should Consider A Marriage Contract There is more to marriage than just a party with a DJ and catered food. Getting married is a serious legal undertaking which involves significant financial consequences. I realize that discussing a marriage contract with your spouse can be extremely difficult and may spoil the mood. Marriage contracts are not for everyone – but they may be helpful for some (if they can muster up the courage to discuss the contract with their spouse). What happens to your property when you do not have a marriage contract? The Family Law Act (the “FLA”) is the legislation that applies to property upon marriage breakdown – it provides default regime for those of us who do not have contracts. The philosophy of the FLA, is that subject to certain exceptions*, any financial growth during the marriage is to be shared equally by both spouses. Accordingly upon marriage breakdown caused by separation or death, a calculation is done for each spouse to determine the growth in the value of that spouse’s assets during the marriage. The FLA then prescribes that a payment is to be made by one party to the other to provide for equal financial growth during the marriage. Please note a common misconception is that parties will end up with the same net worth on marriage breakdown – this is not necessarily true, especially if one spouse came into the marriage with significant assets! The exceptions mentioned above relate primarily to the matrimonial home, inheritances and gifts. Note that if you are living in the same home at the date of marriage as at the date of separation or death, the entire net value of the home is shared equally between the spouses, but if you move homes the entire net value of the home is NOT necessarily shared equally between the parties. The court may award a spouse an amount that is more or less than half the difference between net family properties if the court is of the opinion that equalizing net family properties would be unconscionable. Marriage Contract Parties wishing to opt out of the property provisions of the FLA can enter into a marriage contract to provide for different provisions than contemplated in the FLA. Among other things, a marriage contract may deal with: – property; – support obligations; and – directing the education and moral training of children. Note that if you decide to enter into a marriage contract the court may set aside a contract for various reasons including if: – If a party failed to disclose to the other significant assets or significant debts or other liabilities existing when the domestic contract was made; – If a party did not understand the nature and consequences of the domestic contract; and – Otherwise in accordance with the law of contract. Further the court may disregard any provision of a contract respecting provision for support if: – the provision results in unconscionable circumstances; – the provision relates to a dependent who qualifies for social assistance; or – there is a default in paying support under the contract. If you are interested in drafting a marriage contract please contact Ashley Doidge of Devry Smith Frank LLP at 416-224-1996 or Ashley.doidge@devrylaw.ca “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Wills and EstatesAugust 13, 2019September 30, 2020
I Owned the Home Before We Married – Why Does My Spouse Get a Share of It? We are all familiar with the skyrocketing price of homes in Toronto and the surrounding area. It is not a simple feat to purchase a home – it requires a lot of hard work and obviously, money. Picture this: you work your way through school, spend years in full-time employment, finally earn enough income to secure a home, make mortgage payments on your own for several years, meet your partner, marry said partner, separate from said partner, and then you lose a large portion of equity in your home to that partner. For many, this is an unfortunate reality and the reason why is something our clients should be aware of, given that the family home is most often a couples’ most significant asset. In Ontario, there are special rules in respect of the treatment of the matrimonial home upon marriage dissolution. The Family Law Act defines a “matrimonial home” as follows: “Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.” It is important to note that a couple can have more than one matrimonial home. A cottage for example, ordinarily occupied by both spouses, can be a matrimonial home. A hunting cabin only ever used by one spouse on the other hand would not be considered a matrimonial home. Under the law in Ontario, a couple’s property is not divided upon separation, but rather, the value of that property and more specifically, the growth in value of property that spouses share is divided. What this means is that if the title to the matrimonial home is in your name (perhaps you owed it before the marriage), it stays in your name (subject to some claims your spouse could make if he or she made significant contributions to the property), but your spouse has a right to claim a share in the value of a matrimonial home as part of an equalization payment dividing property. Absent a marriage contract, the entire equity in a matrimonial home is always included in the value of assets that married spouses share. With almost every other type of asset, spouses only share in the growth in value during the marriage. Take for example an art collection – purchased by both spouses – this is something you and your partner would share the wealth in. The matrimonial home on the other hand is not. Section 5(2) of the Family Law Act does not allow a spouse to get any credit for bringing a property into the marriage if that property was a matrimonial home on the date of separation. So, without a marriage contract, a couple will share whatever value is in the matrimonial home. Unless the matrimonial home is jointly owned, there is no right to “half” the home but instead, a right to have whatever equity lies within the home included in property/asset division. In terms of possession of the home, both spouses have an equal right to possession pursuant to section 19 of the Family Law Act. What this means is that one spouse cannot unilaterally exclude the other from the matrimonial home, even if they own it. A spouse (whether on title or not) can also apply to the court for exclusive possession of the matrimonial home (s. 24 of the Family Law Act). A court order for exclusive possession has the effect of excluding a spouse from the property for a period of time as determined by the court. If you are planning on getting married and own a home, you may want to consider putting protections in place and these protections would come in the form of a marriage contract. A marriage contract – entered into in anticipation or marriage or after a marriage has already happened – can exclude the matrimonial home from a spouses net family property. This would have the effect of the spouses not sharing in the equity in the home on date of separation. If the marriage contract is done properly, which requires the help of a lawyer, then judges usually think that giving a spouse credit for bringing the home into the marriage is fair. For more information regarding divorce, property division, marriage contracts or any other family law related topic, contact Toronto family lawyer John Schuman at 416-446-5080 or John.Schuman@devrylaw.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Family LawMarch 5, 2019June 14, 2020
Legally Bound to be Faithful During the Marriage? By: Katelyn Bell, Summer Law Student Celebrities Justin Timberlake and wife Jessica Biel made headlines a couple years back when word spread that they had an “infidelity clause” contained within their marriage contract. The clause allegedly stipulates that if Timberlake is unfaithful to Biel, he owes her $500,000.00. This type of clause is known as a “lifestyle clause,” which are more common than you would think. The clauses address non-financial aspects of a marriage, and the range of things in which they can outline is quite vast. While some clauses may stipulate how many times the in-laws are allowed to visit per year, others may set out body-weight requirements (woah), and then of course, there’s the ones that speak to extra-marital affairs. Ultimatums about infidelity are among the most popular lifestyle clauses in domestic agreements. And though infidelity clauses are quite common for celebrities – consider also Catherine Zeta Jones and Michael Douglas, or Brad Pitt and Angelina Jolie – it isn’t only celebrities who choose to include these types of clauses in their relationship agreements. The general public is making use of lifestyle clauses as well, especially those relating to infidelity. Reason being: (1) These types of clauses are a way to ensure financial stability, and (2) Having a clause of this type may be an effort on the part of one spouse to prevent (or at least try to prevent) their partner from cheating. But do they work? With regards to point (1) above, in order for the clause to afford the wronged spouse any money, the clause must be enforceable in the courts. If the domestic contract is contrary to public policy, despite its validity at the time, the court will not enforce such an agreement. In Canada, “fault-based divorce” has been eliminated from the legislation. Though the Divorce Act originally provided two grounds for divorce – cruelty/adultery and no-fault – today there is only one ground, which is marriage breakdown (s. 8 of DA). Marriage breakdown is a no-fault ground to divorce. Because Canada’s divorce legislation is “no-fault,” including a clause in a contract which explicitly puts a spouse at fault (i.e.: “If you cheat on me you owe me $60,000.00”) is most likely unenforceable. Our system is not meant to punish individuals for misbehaviour, and as such, adultery is not a determining factor in asset distribution. Though an infidelity clause has yet to be challenged in a Canadian court, the D’Andrade v Schrage (2011) decision provides some insight as to how Canadian courts are likely to respond to an infidelity clause in a pre-nuptial agreement. In this decision, the court rejected the argument that an affair during the negotiations of a marriage agreement (being negotiated after the parties were already married) would void the agreement. The court stated: “In recognition of the fact that marriages are complicated institutions, whose failure can rarely be attributed to one party or the other, the law has evolved in a fashion that by and large eliminates conduct from the analysis of financial entitlement…” “…it is important to consider the purpose of the contract in question. It is not to enforce personal obligations such as the duty to remain faithful or the commitment to remain in the relationship. While people may feel that these obligations are part of the marriage “contract”, these are not the obligations that domestic contracts are meant to deal with.” In the United States, in a case which challenged an infidelity clause, the court found that the clause in the domestic agreement was not enforceable because it was contrary to the public policy underlying California’s no-fault divorce laws. Based on the above, it’s highly improbable that an infidelity clause would be enforced by a Canadian court. So with regards to the question of “But do they work?”, the answer to point (1) is most likely no, but what about point (2)? Will the inclusion of such a clause in a domestic agreement work to keep your spouse faithful? Reportedly, when Tiger Woods was rumored to be seeking back with ex-wife Elin Nordegren, Nordegren wanted an infidelity clause contained within their pre-nup with a $350 million financial penalty for Woods if he were to ever cheat again. Of course, whether or not the clause will work as a deterrent depends on each individual. While some spouses argue that these types of clauses are the antidote to adultery, many others may disagree. Ultimately, every relationship is different and spouses will have to decide which, if any, lifestyle clauses make sense for their relationship. If a couple chooses to insert an infidelity clause in their domestic agreement, as long as the contract has a severability clause, the rest of the contract will remain enforceable (so long as it remains legally valid), even if the adultery clause is not. If you are in need of a Family lawyer, please contact the family lawyers of Devry Smith Frank LLP for assistance, or call us directly at 416-449-1400. “This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Family LawJune 30, 2017June 22, 2020
What marriage contracts or cohabitation agreements cannot do A previous blog discussed the many benefits to having a marriage contract or cohabitation agreement. That blog described how couples can have certainty in their lives, if they are married through a marriage contract, or if they are living together through a cohabitation agreement. There are many ways that they can set up their lives to be better than they would be if the couples stayed under the provisions of the Family Law Act, or went to court to resolve the matters between them. However, the law prohibits marriage contracts from doing eight important things: Marriage contracts cannot set parenting terms (address issues regarding custody or access). Judges always have the right to make the custody or access order that they feel is in the “best interest of a child”, regardless of an agreement between the parties. While the Family Law Act specifically allows marriage contracts and cohabitation agreements to address the educational and moral training of children, the Act also says that judges can override the contract if doing so is in “best interest of the child”. A marriage contract or cohabitation agreement cannot restrict either married spouse’s right to be in a possession of a matrimonial home. On separation, married spouses have an equal right to stay in any matrimonial home, and there can be more than one. Marriage contracts cannot require one spouse to leave a matrimonial home. They also cannot authorize one spouse to sell, mortgage or otherwise encumber or dispose of a matrimonial home before the spouses are divorced or they have a separation agreement or court order addressing the issue. Only married spouses can have matrimonial homes, so this restriction does not apply to cohabitation agreements unless the parties marry with the agreement still in effect. (Note: A cohabitation agreement could create rights to a property that are same as matrimonial home rights for parties who are married.) A marriage contract cannot opt parties out of the Child Support Guidelines unless the provisions benefit the child as much or more than the Child Support Guidelines. In any event, the court always has the right to make an order that is in accordance with the Child Support Guidelines if the judge does not like the terms of the agreement. A marriage contract cannot require that the parties go to mediation or arbitration instead of court after separation. The Family Law Act only allows parties to agree to mediation or arbitration after the dispute between them has already arisen. The parties can say that they would like to maintain a good relationship and use a more amicable process than court after they separate, but those terms in the marriage contract are not binding on the parties. Marriage contracts are not recognized under the Income Tax Act with regard to the treatment of support. Periodic spousal support paid during or after the marriage pursuant to the terms of a marriage contract or cohabitation agreement will not be deductible to the payer and taxable in the hands of the recipient. Unless the parties sign a separation agreement, or obtain a court order, confirming those terms. People who are living together cannot agree that one will pay support to the other to shift the tax burdens to the person who pays tax at the lower rate. Marriage contracts cannot waive a spouse’s entitlement to receive disclosure before signing the contract or signing a separation agreement. The Family Law Act gives judges the power to set aside any marriage contract, cohabitation agreement, or separation agreement that was negotiated without the parties receiving full financial disclosure. A marriage contract or a cohabitation agreement also cannot waive a spouse’s right to obtain independent legal advice on either the marriage contract, cohabitation agreement, or a subsequent separation agreement. Again, judges always have the power to set aside an agreement that one or both spouses did not understand. The best evidence that the spouses understood an agreement is for them to have had independent legal advice. A marriage contract or a cohabitation agreement is also not enforceable in relation to circumstances that the parties did not contemplate at the time that they signed it. If the couple wants their marriage contract or cohabitation agreement to be enforceable no matter what circumstances happen in the future, it is important that the agreement state that they have contemplated all possible future happenings and have still decided that, no matter what happens, they wish to be bound by the marriage contract or a cohabitation agreement. (Ensuring that a marriage contract meets this requirement is one of the trickier aspects of marriage contracts and it is another reason why lawyers need to be involved in the creation of a marriage contract.) The above are some of the restrictions on the creation of marriage contracts or cohabitation agreements. As long as couples stay away from the above restrictions, they will likely have an agreement that the court will enforce that will give them some certainty with regard to their affairs after marriage breakdown. By Fauzan SiddiquiBlog, Family LawJune 26, 2016December 5, 2020
