Do You Need a Prenup Before Marriage in Ontario?

If you are engaged, a prenup can feel either sensible or awkward. The better question is not whether you are planning to separate, but what Ontario law would do with your property if you did, and whether you are comfortable with that result.

This article explains the default rules, who tends to gain or lose by changing them, and the limits on what a prenup can do. It is general information, not advice on your situation.

What a prenup is under Ontario law

The words prenup and prenuptial agreement are informal. The Family Law Act uses the term marriage contract. A marriage contract is one type of domestic contract, along with separation agreements, cohabitation agreements, paternity agreements and family arbitration agreements.

Two people who are married to each other or who intend to marry may make one. In it they can agree on their rights and obligations during the marriage, on separation, on annulment or divorce, or on death. Despite the popular name, a couple who are already married can also make a marriage contract.

What happens to property if you have no contract

Without a contract, Ontario's equalization rules apply. Each spouse's net family property is the value of everything they own on the valuation date, other than excluded property, after deducting debts and other liabilities and the value of property (other than a matrimonial home) they owned on the date of marriage.

On divorce, nullity, or separation with no reasonable prospect of getting back together, 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. If you claim a deduction or exclusion, you are the one who has to prove it.

Who tends to benefit from a prenup

The default rules are not unfair to everyone. They are designed to share the growth in wealth during a marriage. A prenup matters most when you want a different result. A spouse can agree by domestic contract that certain property is not included in net family property.

• Someone who owns a home before the wedding. Without a contract, the matrimonial home gets no date-of-marriage deduction and no gift or inheritance exclusion, so its full value is shared unless the spouses agree otherwise.
• Someone expecting a significant gift or inheritance that may be put into the family home. Gifts and inheritances from a third person after the date of marriage are already excluded without a contract, but not a matrimonial home, whose full value is shared unless the spouses agree otherwise.
• Someone with a business or investments who wants a clear agreement about how they are treated.
• The lower-earning or lower-asset spouse, who may want certainty about support or about how a home will be dealt with.
• Couples who simply prefer to set their own terms rather than rely on a formula.

If both of you will start with little and build assets together, the default rules may already produce a result you find reasonable. That is a decision for the two of you, ideally after advice.

What a prenup cannot do

A marriage contract can deal with property, support and other matters in the settlement of your affairs. It can mention the education and moral training of your children, but not decision-making responsibility or parenting time. Even on child-related terms that it can cover, a court may disregard a provision if doing so is in the child's best interests. On child support, a court may disregard a provision that is unreasonable having regard to the child support guidelines.

A term that tries to limit a spouse's rights in the matrimonial home under Part II of the Act is unenforceable. Both spouses have an equal right to possession of a matrimonial home, whoever owns it. If only one spouse has an interest in the home, however, the other spouse's right of possession is personal as against the owner and ends when they stop being spouses, unless a separation agreement or court order says otherwise.

A prenup is also not guaranteed to survive a challenge. A court may set aside a domestic contract on certain grounds, such as failure to disclose significant assets or debts.

If you are not marrying

Ontario's property-division rules do not require unmarried couples to split property acquired while living together, so common-law partners can set property rights by a cohabitation agreement. If the parties to a cohabitation agreement later marry each other, it is treated as a marriage contract.

What to do next

• List what each of you owns and owes, including any home, business, pension and debts.
• Decide which results you want to change from the default rules.
• Raise the topic early rather than days before the wedding.
• Each speak to a different lawyer and exchange financial information before signing.
• Remember it must be in writing, signed by both of you and witnessed.

Frequently asked questions