When you love someone you likely want the best for that person and do not want to cause them unnecessary stress, hurt or heartache.
Having a conversation upfront in your relationship regarding expectations and concerns pertaining to what happens to your property or money can save each party to a relationship significant emotional and financial strain should the unforeseeable occur and the relationship end.When you care about someone, discussing these matters while the relationship is good allows both sides to obtain security and comfort and minimizes the potential for a messy and expensive separation or divorce.
What is a prenuptial or cohabitation agreement?
A prenuptial or cohabitation agreement specifies how property shall be distributed or divided in the event of a separation or divorce. Such an agreement can also specify entitlement to spousal support.
Without an agreement in place, any property that either spouse has an interest in may be subject to a claim by their spouse. In Saskatchewan, the family property legislation states that it is inherent in a spousal relationship that there is joint contribution, whether financial or otherwise, by the spouses and therefore each spouse is entitled to receive an equal distribution of the family property.
So, what does this mean? Generally, once two people legally become “spouses” the fair market value of any property that either spouse acquires an interest in during the spousal relationship is shareable between spouses upon a separation or divorce.
In regard to property owned prior to a spousal relationship, the legislation generally provides an exemption for the fair market value brought into the relationship. However, any growth in value is shareable. Furthermore, you need to be able to prove or trace your exemption. So, if property is sold throughout the relationship, or comingled with other property, you could lose your exemption. There is no exemption for a family home or household goods. It does not matter who owned the family home prior to the relationship or who created the equity, a family home or household goods are divided equally if you separate.
The purpose of a prenuptial or cohabitation agreement is to alter these legislative rules. It’s your relationship; you and your spouse can agree what should happen with your respective property or finances should you go your separate ways. As every relationship is unique, each couple may have particular interests, needs or concerns to be addressed. Without a prenuptial or cohabitation agreement, the legislation will apply. If the rules set by the legislation do not align with your wants or needs, then a prenuptial or cohabitation agreement should be obtained.
Who should consider getting a prenuptial or cohabitation agreement?
You may consider a prenuptial agreement prior to marriage. In Saskatchewan, if you cohabitate in a spousal like relationship for a period of at least two years, you are considered common law spouses and have the same legal rights to property division as married spouses. As such, if you are moving in with someone, you may also consider an agreement of this nature. Often, having these discussions before you move in allows you to assess the issues at the start of the cohabitation, as opposed to facing a difficult decision after you have lived together for almost two years.
Couples may also look at entering an agreement if a significant life event occurs or is expected (like an anticipated gift or inheritance). Similarly, if an individual is being issued shares in a family corporation or becomes a beneficiary in a trust, an agreement may be entered to address those particular property interests.
Agreements of this nature are also particularly important for couples entering a relationship later in life, or a “second relationship.” Often these couples have worked hard to build up property interests prior to the relationship or have children from a previous relationship that they want to ensure their property goes to.
I don’t anticipate my relationship to end, so why do I need an agreement?
No one hopes for a bad ending. Just like you buy insurance for your home or car, hoping you will never need it, having a prenuptial or cohabitation agreement can provide you with similar insurance should your relationship end unexpectedly.
When you make the decision to cohabitate or marry, you should have conversations about money and property with your spouse. Having those conversations during happy times will honestly be easier than having them amidst or after a separation. Talking to your spouse about your expectations, values, concerns and fears at the front end can very well save you years and significant expense fighting about it later on should you separate. Often when a separation does occur, emotions run high and people make decisions out of haste or spite. This increases conflict for both sides. Agreement on the terms of your separation in advance can alleviate this conflict.
Notably, a prenuptial or cohabitation agreement does not need to control or dictate how you spend your money or distribute your property during your relationship. It is there, just in case you need it. Hopefully you never do and it’s nothing more than a piece of paper collecting dust along with those insurance policies you renew each year.
Will the lawyers create conflict in my relationship?
Television and movies show us big board room tables with lawyers in suits advocating for their client’s rights. But that is not what these agreements should be about. These agreements are about discussing what is important to each of you in your relationship. The Saskatchewan legislation requires each party to have their own independent legal advice. However, that does not dictate the process. You and your spouse may choose to meet together with one lawyer or mediator to first discuss your collective thoughts and work on a draft agreement. Once you are both happy with the draft agreement, then you meet with independent lawyers for a final review and signing. This is your agreement and we can tailor the process to ensure you are comfortable.
Again, having a professional assist you and your spouse discuss these issues will be easier at the prenuptial stage than upon separation. A lawyer or mediator can work with you and your spouse in a collaborative approach. It does not need to be an adversarial process.
Will an agreement just be an extra expense?
The cost of a prenuptial or cohabitation agreement is often nominal compared to the costs that may be associated with a contentious separation or divorce. Furthermore, specifying exemptions or entitlements may protect certain assets that have significant monetary value that would otherwise be divisible under family property legislation.
For example, one party owns a home prior to the spousal relationship. The home is valued at $500,000 and is debt free. Upon marriage, if the couple resides in this home, the entire value is divisible upon separation regardless of who built up the equity prior to the relationship. The cost of an agreement is nominal compared to your spouse receiving $250,000 in equity from the home upon separation.
By way of further example, if one spouse receives a gift or inheritance during the marriage, if a separation then occurs, half of the value of that gift or inheritance may go to their spouse. Often families do succession planning with the intention of keeping “family wealth” within the family and it is important not to subject that wealth to a family property claim. Again, often the value of the inheritance or the property being protected far exceeds the cost of an agreement.
What if “what’s mine is mine and yours is yours” doesn’t work for us?
No problem. Agreements of this nature can be tailored to your relationship. There is no one-size-fits-all here. Some people choose a very black and white, “what’s mine is mine, what’s yours is yours” agreement, and only jointly owned property is shared if they separate. Other people say everything earned during the spousal relationship is shareable except X, Y or Z. Others limit their agreement to only address particular items such as the equity in the family home earned pre-marriage, interest in a family trust or business, or an anticipated gift or inheritance. This is your agreement; we can address as much or as little as you need.
So how do I talk to my partner about this agreement?
As with any big discussion it is important to approach the subject with your partner in the right way. The intention of this agreement is not to anticipate or plan for a separation. Rather, you’re raising these issues with your partner to have a calm and loving conversation about your expectations and concerns should the relationship break down. The conversation does not need to be confrontational and can be in preparation for making the major life decision to move in together or marry.
Our office is happy to meet with you, or with you and your partner together, to discuss the premise of this agreement and why it is actually a romantic thing to do for your relationship. Having this conversation now can save both of you significant emotional and financial stress and strain if the unforeseeable occurs. If an agreement can provide both of you comfort and security, and mitigate the potential for a messy and expensive divorce or separation, isn’t an agreement of this nature a good thing for both of you?
For more information contact:
Kimberly D. Visram
STEVENSON HOOD THORNTON BEAUBIER LLP
500 – 123 2nd Avenue South, Saskatoon, SK S7K 7E6
The information in this guide is not legal advice. We encourage you
to consult with your legal advisor for specific advice.