Prenups…we hear about them a lot in high profile marriages and in movies and television when the wealthy heir or heiress is about to get married. The term prenup (short for prenuptial) is actually an American term. In Ontario, they are referred to as domestic contracts or marriage contracts.
While the term prenup is still used in Canada, it specifically refers to contracts signed before marriage. A domestic or marriage contract on the other hand, can be signed at any time during a marriage. In the case of common law relationships, they are referred to as cohabitation agreements.
Let’s talk a bit about prenups and why I believe they are an important consideration prior to marriage, especially if it is your second or third.
Let’s face it, when you are getting married the last thing you want to think about is what happens if it does not work out. That is the main reason most marriages don’t have a prenup in place (about 92% in fact). But the hard fact is, divorces happen about 50% of the time. In the case of first marriages, when the couple is young and just starting out, there may not be a lot that needs protecting in the event things do not work out.
However, if you are getting married for the second or third time and you are coming into the marriage with assets that you have worked hard for, a prenuptial agreement makes a lot of sense. I learned this the hard way.
After my first divorce I had to survive on my own for the first time in over 17 years. I dove into my new career as a real estate agent, bought my first home (solo), my first investment property and started working hard to forge a new life for myself.
When I decided to marry again, I had built up some significant assets, including property. I did not even consider what might happen if we split up but I soon found out. Turns out that this marriage was not one of my better decisions and upon our divorce, my ex was entitled to half of my assets – including properties I had worked so hard for. It was not fair but it is the law.
There is a business side to marriage and it is important to consider financials before entering into one. Just like discussions on children, where to live and your dreams for the future, a discussion about your finances should be done before you say “I do”. If this is something your future partner is avoiding, that could be a major red flag.
A prenup gives you some insurance in case things do not work out and can help to avoid disappointment and arguments when you have already agreed on how pre-marriage property will be dealt with.
And like any legal document, it is always important to get it reviewed by a lawyer to ensure it is fair and clearly understood by both parties.
Not sure where to start? You can download a free template here to see what’s involved.