Financial Disclosure for a Marriage Contract in Ontario

If you are preparing a marriage contract, one of the most important jobs is also one of the least glamorous: telling your future spouse what you own and what you owe. It is easy to feel awkward about this or to leave out items that seem minor.

This article explains why disclosure matters, what information is worth gathering, and what can happen if something significant is left out. It is general information, and a lawyer can confirm what applies to you.

Why disclosure matters

Ontario's guidance advises that partners exchange financial information before signing a marriage contract, and that each use a different lawyer. The reason is simple: you cannot make a fair deal about property and support if you do not know what is on the table.

Disclosure also protects the contract itself. The Family Law Act lets a court set aside a domestic contract or a provision in it on application if a party failed to disclose significant assets, or significant debts or other liabilities, existing when the contract was made.

What to gather and share

The law refers to significant assets and significant debts or other liabilities. What counts as significant depends on the facts, so when in doubt, include it and let your lawyers sort it out. A useful starting list:

• Real estate, including your home, a cottage or investment property, with mortgage balances.
• Bank, investment, retirement and pension statements.
• Business interests, including ownership share and financial statements.
• Vehicles, valuable collections and other major personal property.
• Debts and liabilities such as loans, lines of credit, credit cards, tax debts and guarantees you have given.
• Recent tax returns and notices of assessment, which help show income.
• Expected gifts or inheritances, if you know of them.

Income matters most when the contract touches on support. When a court looks at spousal support under the Divorce Act, it considers the condition, means, needs and other circumstances of each spouse, including any agreement or arrangement relating to support.

Why the numbers matter to the contract

Under the equalization rules, you subtract debts and excluded property from property owned on separation, then do the same for the date of marriage. A negative result counts as zero, and the larger share minus the smaller share, divided by two, is the equalization payment. A marriage contract often changes how this works, so both of you need to understand the starting figures.

Inheritances are a good example of why precision matters. Property a spouse inherited, other than the family home, is excluded property. An inherited family home does not count as excluded property and must be divided equally unless the spouses agree otherwise, for example in a marriage contract. If an inheritance or a home is involved, say so clearly in your disclosure and discuss it with your lawyer.

What can happen if something is hidden

If a significant asset or debt was not disclosed, the other spouse may apply to set the contract or a provision aside. That is the first of two steps. The applicant must show one of the listed circumstances, which is necessary but not sufficient, and then the court decides whether to exercise its discretion to set the agreement or provision aside, with fairness considered at that stage.

The remedy is all or nothing for the provision at issue. A court can set aside a contract or provision in its entirety, but it cannot carve particular assets out of an agreement or amend it. That can leave both people with an outcome neither planned.

There is also a timing point. The Family Law Act sets no limitation period for an application to set aside a domestic contract, so the Limitations Act governs. In one Court of Appeal decision the majority held that the declaration sought had no limitation period, while the equalization claim stays subject to the six-year period and the support claim has no limitation period. Because this is technical, ask a lawyer how it applies to your facts.

Hiding information is not the only way a contract can be challenged. A court may also set a contract aside if a party did not understand its nature or consequences, or otherwise in accordance with the law of contract.

What to do next

Treat disclosure as a project with a deadline well before the signing date.

• Make a full list of assets and debts, and gather supporting statements.
• Exchange the information with your partner before the contract is drafted or signed.
• Give your own lawyer the same documents you give your partner.
• Ask your lawyer whether to attach the disclosure to the contract or refer to it in the text.
• Update the information if something significant changes before you sign.
• Keep copies of what you shared and when.

Remember that signing requires both spouses to sign in front of a witness who also signs. A lawyer can walk you through the whole process and confirm what you need for your situation.

Frequently asked questions