Why a prenuptial agreement is a good idea

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Q. I’m 34 years old and have been dating my girlfriend, who’s 10 years younger, for two years. I’m considering proposing marriage to her in the near future. We both have decent incomes, but due to our age gap and different family backgrounds, my net worth is significantly higher. In case of a divorce, how would the following assets get divided in Ontario?

Stock portfolio currently worth $100,000
Condo acquired before marriage
50% ownership in a service business (assuming no salary or profit distribution during the marriage)
Future inheritance of a rental property with income, in Europe
Proceeds from the sale of a house in Europe (another future inheritance)

I would most likely get legal consultation to prepare a prenuptial agreement, but would greatly appreciate some initial advice on the asset division. –Michael A. Thanks for your question, Michael. In Ontario, a prenuptial agreement is the best way to protect premarital assets under any circumstances. You mentioned a large gap in age between you and your partner, but have not said whether or not there were any previous marriages or children. Like a will, a prenup is meant to secure the question of all pre-existing assets for both parties. It’s important to know that some assets become matrimonial under the law once you become married, and if those were excluded under a prenup, they might be challenged in the future. The matrimonial home would be an example of this: If you eventually live together in the condo you’ve mentioned as husband and wife, the condo will be considered a matrimonial home, despite the fact that you acquired it prior to marriage. But any assets existing prior to the marriage may be excluded property if not commingled during the marriage. I would caution you to keep extremely good records of any equity assets you are bringing into the relationship. Also keep in mind that future inheritances of any type, if not commingled, are not considered matrimonial assets. Studies have shown that discussing these issues and dealing with them in advance of marriage is the best way to protect you and your future spouse from disappointment and fights, later on, should the marriage not work out. So, it’s always a good idea to have a third party mediate this discussion between you and your partner. If you have a financial planner with the skills to do this for you, they can help you prepare a document that could go to your lawyer outlining your assets for exclusion. This should go a long way towards giving you and your partner the transparency you need to make your future marriage a long and happy one. Debbie Hartzman is a Certified Financial Planner, a Chartered Life Underwriter and Certified Divorce Financial Analyst in Kingston, Ont. She is also the author of Divorce is not easy, but it can be fair.

Comments Cancel reply

Liza says:

April 28, 2020 at 11:30 am

I was in a similar situation and suggested a co-habitual agreement before we moved in together. My partner was really upset about it and kept making digs about it. I didn’t understand why it was an issue, since it would only be used for clarification if the relationship didn’t work out. Things fell apart 2 years later and I’m grateful I trusted my gut to have this document.

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J. Mac says:

April 28, 2020 at 1:06 pm

Don’t delude yourselves folks. A pre nuptial agreement isn’t worth the paper it is printed on!! As noted in the article, even if it is itemized as something held before the marriage, if the asset becomes “co-mingled” during the marriage, it is matrimonial . The only pre-nups that work are ones that are actually dowries.

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KAREN says:

January 11, 2021 at 1:05 pm

My fiance owns our current home with about $120k in equity. We are planning on moving to a new home, and getting married in the next 6 months. He has a chunk of investments, I have a much smaller chunk of my own. Our income is 4:1 with him earning significantly more than I do.
We are both previously divorced. He is concerned about the risk losing 50% of his assets again if things go south with us. How would a prenup work regarding the home, whether my name is on the mortgage or not, and whether I pay a portion to the mortgage or not?

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1. MoneySense Editors says:
  
  January 11, 2021 at 3:13 pm
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
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Noel Fernandes says:

May 7, 2021 at 1:53 pm

Hi Debbie,
I understand that the matrimonial home equity is excluded from the calculation of Assets brought into a marriage – and shared jointly.
If the home is purchased 4 months prior to marriage (as two singles)and the down payment contribution by each is not equal (but shared75/25%), does it still have to be split 50/50 or can we claim the individual down payment contributions. Is there any case law on this topic??.
THANKS (my daughter is going through a separation and she contributed $50K more than her spouse.

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1. MoneySense Editors says:
  
  May 7, 2021 at 3:55 pm
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
  Reply