Do You Need a Prenup in Ontario? When It Makes Sense

Not everyone who gets engaged needs a prenup. Whether one makes sense depends on what you own, what you owe, and what the default rules would do in your situation.

This article compares Ontario's default property rules with what a marriage contract can change, and walks through the situations where couples commonly consider one.

What happens if you have no contract

Net family property is the value of all property a spouse owns on the valuation date, except excluded property, after deducting debts and other liabilities and the value of property, other than a matrimonial home, that the spouse owned on the date of marriage. On divorce, nullity, or separation with no reasonable prospect of resuming cohabitation, the spouse with the lesser net family property is entitled to one-half of the difference. A spouse whose figure works out negative is treated as having zero.

Some property is excluded even without a contract, including gifts or inheritances from a third person received after the date of marriage (other than a matrimonial home), damages for personal injuries, and life insurance proceeds. Whoever claims a deduction or exclusion has the onus of proving it.

What a marriage contract can change

A marriage contract may deal with ownership or division of property, support obligations, and any other matter in the settlement of the couple's affairs. Property the spouses agree by domestic contract is not to be included is excluded from net family property. Where a domestic contract deals with a matter also dealt with in the Act, the contract prevails unless the Act provides otherwise.

A contract can also reach further than property. Ontario's government confirms that marriage contracts can cover support, property division and who moves out of the home.

Two people who are married to each other or intend to marry may make a marriage contract, so it is not limited to the time before the wedding. "Prenup" is an informal name; the Family Law Act uses the term "marriage contract".

Situations where couples consider a prenup

• Owning a business: the default rules count what you own on the valuation date, so couples who want to treat a business differently may address it in a contract.
• Expecting an inheritance or gifts: gifts and inheritances from a third person after marriage are already excluded, other than a matrimonial home, but you must prove the exclusion. A contract can set out your agreement more clearly.
• Owning a home before marriage: without a contract, the date-of-marriage deduction and the gift or inheritance exclusion do not apply to the matrimonial home, so its full value is shared unless the spouses agree otherwise.
• Significant debt: debts are deducted in the default calculation, and a contract can record how you want them treated.
• Children from a previous relationship: a contract can deal with property and support, but it cannot decide decision-making responsibility or parenting time. A court may also disregard a child support term that is unreasonable under the child support guidelines.
• Pensions: a contract may provide for an immediate lump-sum transfer out of a pension plan, but other ways of dividing a pension interest by contract are restricted.

What a prenup cannot do

Limits matter as much as options. A marriage contract cannot decide decision-making responsibility or parenting time. A term limiting a spouse's rights in the matrimonial home, including the equal right to possession, is unenforceable. Courts may disregard terms about children where that is in the child's best interests, or child support terms that are unreasonable under the guidelines.

Support waivers can also be set aside in some cases, such as where they result in unconscionable circumstances. A contract can also be set aside for non-disclosure of significant assets or debts, lack of understanding, or reasons under general contract law.

A contract clause cannot remove the court's power to set the contract aside. Arguments such as duress or pressure to sign are made under the general contract law ground. How a court views a particular situation depends on the facts, so it is worth confirming with a lawyer.

Common-law partners and what to do next

Ontario's property-division rules do not require unmarried couples to split property acquired while living together. Common-law partners can set property rights by a cohabitation agreement. If those partners later marry, the cohabitation agreement is deemed to be a marriage contract.

A domestic contract is unenforceable unless it is made in writing, signed by the parties and witnessed. Ontario's government also advises that each partner speak to a different lawyer and exchange financial information before signing a marriage contract or cohabitation agreement.

• Write down what each of you owns and owes today.
• Estimate what the default equalization rules would do in your situation.
• Identify any business, inheritance, home or debt you want treated differently.
• Talk through the idea early, well before the wedding date.
• Have a family lawyer review the draft and explain its limits.

Frequently asked questions