Breaking up is hard to do. The sad fact is that 50 per cent of us will call it quits with the person we once thought we would be with forever. And nothing can make a bad situation worse than arguments over who gets Uncle Harry’s portrait or custody of Lucky, the Labrador retriever.
“A prenuptial agreement (pre-nup) is a roadmap for covering as many eventualities as possible when – or if – a marriage breaks up,” explains Kevin Porter, CA, who runs a practice in Brampton and teaches at the Institute of Chartered Accountants of Ontario’s School of Accountancy.
“Ontario family law is primarily concerned with two areas: the right to equalization payments and the right to support,” says Steve Z. Ranot, CA, CA∙IFA/CB, a partner at Marmer Penner Inc. in Toronto. “These are exactly the areas that a pre-nup should address. The partner with more assets wants to protect him or herself. The one with less wants to ensure they’ll be cared for if things don’t work out, and get their share of any wealth that accumulates during the marriage.”
Not long ago, pre-nups were thought to be the domain of the rich and famous. Today, Mr. Porter says anyone with any kind of wealth – property, pensions or savings – should seriously consider getting one. “A properly executed pre-nup can end any discussions about how issues are to be settled or decided,” he says.
Pre-nups can roll both ways. Either party can stipulate conditions for any number of marital circumstances, including issues with children and who will owe whom in the event finances and assets lose, rather than gain, value.
“Pre-nups aren’t just about assets,” Mr. Porter continues. “They should deal with spousal support – and not necessarily just one way. They need to consider things like how to divide shares of small businesses that might be supporting the family, RRSPs, and investments in non-registered accounts.”
“Nor are they guarantees that you get to keep what you came with,” says Mr. Ranot. “I’ve seen many overturned. Full disclosure is critical for the agreement to be binding, and the courts don’t look favourably on any arrangement that doesn’t appear reasonable and equitable.”
One particularly contentious issue that’s often not resolved by a pre-nup is the matrimonial home. “In my experience, courts usually consider it to be the one asset that must be split fifty-fifty,” Mr. Porter says. “They frown on agreements where one party just signs away his or her interest in it, even if the other owned it before the marriage. It’s better to fix the value of it at the time of the marriage, hold any appreciation outside of the pre-nup and split it.”
If you’re considering a pre-nup, make a full and complete list of what you’ll bring to the marriage in terms of property, earnings and other contributions. Then, take it to a lawyer and see to it that your partner does the same. “You’re courting trouble by failing to get proper counsel or legal advice on the agreement,” says Mr. Ranot.
But should you both decide to forgo the advice of an expert, at least note in writing that it’s being waived, Mr. Porter suggests. A verbal agreement is not good enough, and likely won’t be remembered the same way by both parties when it comes time to divide what you’ve got… and what you had.
Inst. of Chartered Accountants——
Bio and Archives
The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario’s 33,000 Chartered Accountants and 5,000 CA students. Since 1879, the Institute has protected the public interest through the CA profession’s high standards of qualification and the enforcement of its rules of professional conduct. The Institute works in partnership with the other provincial Institutes of Chartered Accountants and the Canadian Institute of Chartered Accountants to provide national standards and programs that are used as examples around the world. </em>
