Prenuptial Agreements Are A Must- Here’s Why
Despite the increased risk of not having a prenuptial (or “cohabitation”) agreement, relatively few people obtain one with their partner. Given the awkward conversation that this necessarily involves, not entering into an agreement can perhaps be understood- but it is definitely not advisable.
Major Changes in BC Family Law Act
There were two key changes to the law in BC when the Family Law Act came into force in 2013 that effect the ramifications of having, or not having a prenuptial.
First, in addition to married persons, unmarried people that live together for two years or more have a right to bring claims for property division. If you move in with someone in a “marriage-like” relationship for two years or more, on the breakdown of the relationship the other person could bring a claim for property division forward. With property values increasing in BC year over year, that could be as simple as the value of your house increasing, which over several years could be a significant sum.
Similarly, a spouse gains a right to share in your pension credits or savings accrued over your relationship. Have you received an inheritance or insurance payout? Even though that is normally excluded from division under the act they could argue that it was given to both of you or that placing it in a joint account means you lost your claim to an exclusion.
Cohabitation and Prenuptial Agreements
To balance this, the legislature made another key change in the the Family Law Act over the previous legislation, which provided that courts would have to give increased respect to agreements reached by people, including cohabitation agreements. So, if you don’t like the scheme that the government set out, you have a fairly wide latitude to negotiate one that works for you.
The consequences of not having an agreement can be significant. It can result in high legal bills and a drawn-out separation process. While the drafting of a cohabitation itself is stressful and entails some expense, that stress and expense is nothing compared to what you’ll face if your relationship ends, which we know happens to about 45% of couples.
Once you have decided to pursue a prenuptial or cohabitation agreement, there are some important decisions to make. You cannot always simply request that each party keeps their own assets. If the relationship goes on for 30 years and you have children, that is unlikely to be upheld if challenged in court. There are other requirements to ensure the agreement is enforceable including financial disclosure and an absence of any undue influence from either party. You have a lot on the line, so do it right and that includes obtaining legal advice.
Prenuptial and cohabitation agreements may be difficult to discuss, but doing so only protects your rightfully owned assets and sets expectations between you and your spouse should the relationship end. The conversation about it does not necessarily have to be awkward; it can be similar to purchasing life insurance by guarding against an eventuality. In the end the peace of mind that a formal agreement can bring is nearly invaluable.
Do you need assistance in the formation of a prenuptial or cohabitation agreement? Contact our office today and we will ensure you are well protected moving forward!