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​​Hyden Zakheim, LLP


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Premarital Agreements
Congratulations! You are getting married!

Although the idea of a “pre-nup” or a premarital agreement may be accompanied with a stigma, there are many reasons why a pre-nup should be considered prior to marriage.

Couples often assume the purpose of a premarital agreement is to divide the assets. While this can be a pre-nup tool, it is not the sole focus. So why should you consider a premarital agreement? The answer to this question can be complicated. Let us first explain what can and can be included in a premarital agreement:



What CAN go into a premarital agreement?

What CANNOT go into a premarital agreement?


  • Whether particular items are considered community
    property or separate property (irrespective of whether
    the item was owned prior to marriage or acquired 
    after marriage).
  • Responsibility for premarital debts.
  • Potential spousal support obligations.
  • Financial responsibilities during the marriage (as
    they pertain to community and separate property).
  • *How disputes about the pre-nup are to be resolved
    (for instance through mediation or arbitration).
  • Sunset clause – many couples chose to agree their
    prenuptial agreement will terminate after they are
    married for a certain number of years.
  • *How assets and debts will divided in case of
    separation/divorce.

  • Custody of the children (this includes things
    such as in what religion to raise the children,
    their schooling, etc.).
  • Visitation of the children.
  • Child support.
  • Anything “unconscionable” (unfair) or
    anything that would encourage divorce.
  • Anything “illegal” (as with most contracts).

 
As you can see above, it is not the intent (nor is it permissible) of a pre-nup to encourage divorce. In fact, the top four reasons to consider for setting up a premarital agreement are:

  1. This is not your first marriage and you are not 22! When you remarry, your legal and financial concerns are often very different from your first marriage. You may have children from a prior relationship, own a home, have support obligations, or have other significant assets and debts. A pre-nup (along with a proper estate plan) can ensure that when you pass away, your assets are distributed in such a way that neither your first family nor your new family are excluded.
  2. Your fiancé has a great deal of debt. We do not usually pick our spouse based on their credit rating. If you are marrying someone with significant debt and do not want to be responsible for these debts, then a premarital agreement can help ensure you remain free of your spouse’s obligations.
  3. You own part of a business. Without a premarital agreement in place, when your marriage ends, your marital partner could end up being your business partner and own a share of your business. If you have other business partners, they too may not wish to be partners with your ex-spouse. A pre-nup can help ensure that your spouse does not become an unwanted partner in your business.
  4. You plan to quit your job to raise children or stay at home. Quitting your job will have a negative impact your personal income and future employability. A prenuptial agreement can ensure that the financial burdens and benefits of raising children or staying at home is shared fairly by both spouses.


As with anything, there are many myths, stigmas and rumours regarding premarital agreements. Don’t fall into one of these myth traps:

Prenuptial agreements are only for the wealthy. False! Pre-nups are for ordinary people. Given the high legal fees and stress involved in a divorce as well as peoples’ increasing financial independence, a prenuptial agreement can benefit just about everyone.

Prenuptial agreements are only useful for divorce. False! A premarital agreement in conjunction with estate planning documents can be a useful estate planning tool. It can be especially helpful if you have children from a prior relationship or have family heirlooms you want to keep in the family.

Prenuptial agreements are unromantic. False! Well, maybe not so false. There is nothing romantic about any legal document. However, the ability to sit down and discuss with your future spouse your future financial plans and expectations for the relationship will lead to a more solid foundation and bond than simply expecting your love to take care of everything.

Only men want prenuptial agreements. False! Pre-nups are a great way to set out your expectations for the relationship. For instance, a woman may insist that if she is going to stay home and raise the children, her pre-nup may include provisions to compensate her for this interruption in her career. Or, the woman may choose to include terms in her pre-nup that ensure part of her finances pass to her family rather than her husband.

Prenuptial agreements are expensive. False! Compared to the cost of an average wedding or an average divorce, pre-nups are a bargain. The best analogy is insurance: it’s a one-time expense for something you never hope to use… but if you ever need it, you’ll be glad you have it!