Even the best relationships benefit from a domestic contract

By Tony Poland, LegalMatters Staff • Domestic contracts or prenuptial agreements may not be a priority when couples start out, but they should be, says Toronto family lawyer A. Julia P. Tremain.

“It is something that everyone should consider and one of the reasons is that it is helpful for people to actually think about their future,” says Tremain, a partner with Waddell Phillips Professional Corporation, “It forces people to turn their minds to something that they may want to avoid and that is finances. Often when people get married or begin living common law, they haven’t really considered each other’s finances, their partner’s income and their assets.

“Couples in the blush of love are always happy, happy, happy,” she adds. “There’s never going to be a problem. But it is better to think ahead rather than trying to react if something goes wrong.”

Money can impact the relationship

Money can have a big impact on the health of a relationship, which is why Tremain recommends “getting all your ducks in a row” before cohabitating.

“There can be difficult decisions to make because some people are spenders and some are savers,” she tells LegalMattersCanada.ca. “Finances are generally one of the biggest areas of dispute between couples.”

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Tremain says it can be especially important for those planning to live common law to get a domestic contract. She explains that unlike divorced married couples, common-law couples in Ontario are not entitled to a share of their partner’s assets if the relationship ends.

“If you are living common law it makes sense to be very clear about who has what claim over what assets,” Tremain says. “You want to think about what would happen if you separated many years down the road. If you have an agreement that sets out expectations, there will be no surprises.”

She says a young couple might not have much in the way of assets and may not believe they need an agreement. 

However, Tremain says circumstances will invariably change. One partner may decide to give up their career to stay home and raise children. She says one may receive a loan or gift from a family member to be used for a down payment for a house. If the couple splits, does that have to be repaid?

People with children from a previous relationship who get remarried later in life or decide to cohabitate should consider a domestic agreement to protect any inheritances or to provide guidance if one partner dies unexpectedly,” Tremain says.

“It’s really about finances and how you to protect assets,” she says.  

Revisit agreement

Tremain says people with a domestic contract should also update it throughout the years, since circumstances will certainly change. 

“Something to consider with these agreements is that people may make them when they’re young, when they have no assets and no idea how much money they’re going to make in the future. Circumstances can very different if they separate 40 years later,” she says. “Couples may want to build a review into their domestic contract to ensure it still reflects how they feel about their finances.”

As well, it is also advisable for couples to update their wills to reflect their domestic agreement, Tremain says.

Couples would be wise to meet with a family lawyer to create a prenup or domestic agreement, she says.

“When they sit down to get advice, they should know their assets. They should know all their debts and they should have a sense of what each other’s income is,” says Tremain. “It comes down to being open and honest. For example, if one partner is a beneficiary of a trust, they need to disclose that information to the other person.”

Even though a couple sits down together to draw up the agreement “one lawyer should never do one agreement for both people,” she advises.

“People should always get their own independent legal advice,” says Tremain. “One lawyer may draw up the agreement but it should be reviewed by independent counsel to ensure that both people are fully aware of their rights and obligations under the law.

“That’s important. Some people say, ‘We’re in love, we’re both agreeing on this. We know what we want to do.’ But there could be potential conflicts.”