I am often asked if marriage agreements and cohabitation agreements hold up in court.
My answer is yes, if done correctly.
Couples generally consider marriage (or cohabitation) agreements when one person is coming into the relationship with more assets that the other person. Marriage agreements are becoming more common, as there are more second marriages and couples marrying later in life.
The purpose of a marriage agreement is for the couple to decide how they will arrange their financial affairs during their marriage, and how they will split assets in the event of a separation.
Typically, the spouse owning more assets at the start of the relationship wants to protect those assets from division in the event of a separation.
This can be accomplished if two important actions are taken: full and complete financial disclosure of both individual’s assets and debts, and independent legal advice. When these two important items are not present, the marriage agreement is not going to stand up in court, and the result will be expensive and messy.
Take the case of the couple known in the court decision as KDRA and YJAA, in a decision released in December, 2014. The judge who heard the trial referred to the parties by their initials in order to save the husband, a retired RCMP officer, from public humiliation.
In this case, the husband went about the marriage agreement all wrong. He had his best man, also a retired RCMP officer, present the marriage agreement, already signed by the husband-to-be, to his bride on the night before their wedding while she was setting up the reception hall with friends. There was no opportunity for the bride to seek out independent legal advice, or to give the marriage agreement consideration. She was told if she did not sign it, there would be no wedding the next day. Friends and family from out of town had already arrived.
The judge also found that there had been incomplete financial disclosure in the marriage agreement, and the husband had misstated some facts in the marriage agreement.
The end result for the couple was exactly what a good marriage agreement can avoid: a long and difficult court battle that ended with 8 days of trial, at great expense to both of the parties.
At the end of the day, the husband did have to share assets created during the marriage with his wife, and pay spousal support. He will likely also have to contribute to her legal fees. The cost to him will exceed $20,000.
The moral of this story is: do consider a marriage agreement, but make sure it is done properly with both parties having the time to consider the terms of the agreement, and to obtain independent legal advice.
Karen is an associate lawyer with RDM Lawyers LLP in Abbotsford