Protecting a Family Business or Inheritance With a Prenup in Alberta

If you own a family business or expect an inheritance, you may worry that a divorce could force a sale or a buyout. Alberta law already protects some property, so the first question is how much protection you have without any agreement.

A prenup can add certainty, but only if it is made the right way. This article explains what the law exempts, what a prenup can add, and the steps that make an agreement enforceable.

This article covers the law of Alberta.

What Alberta already exempts from division

For property acquired during the marriage that is not exempt, the Court must distribute it equally between the spouses unless that would not be just and equitable. That is the default result when there is no valid agreement.

Exempt property is treated differently. Gifts from third parties, inheritances and property acquired before the marriage are excluded at their market value on the applicable date. In practice, an inheritance or a business you owned before marriage starts from a protected position.

Where the exemption stops

The protection is not complete. The Court distributes in a just and equitable manner any increase in value of exempted property up to the time of trial. A business that grows during a long marriage can therefore still be affected.

The Court also looks at each spouse's contribution to a business, each spouse's income and property at marriage and at trial, and the length of the marriage. A spouse who worked in the business or supported the household may have arguments about its growth. Mixing inherited money into a joint account or a shared home can also make the picture harder to sort out, so it is worth getting advice on how you hold assets.

What a prenup adds

A written agreement that is enforceable under section 38 of the Family Property Act replaces the default division rules for the property it covers. An agreement can say how property is divided on separation, on becoming former adult interdependent partners, or on dissolution of the marriage, and it can cover property owned at signing or acquired later.

• It can set out how the business, including its future growth, is treated if the marriage ends.
• It can address inherited property you already own or receive later.
• It gives both of you a clear answer in advance instead of leaving the question to the Court.

What makes the agreement enforceable

Each party must acknowledge in writing, apart from the other party, that they know the nature and effect of the agreement, understand their possible future claims under the Act and intend to give them up as the agreement provides, and are signing freely and voluntarily. Each acknowledgment must be made before a lawyer who is not acting for the other party.

An agreement made before marriage is unenforceable after the marriage unless it is clear that the parties intended it to apply or continue to apply after the marriage. Say so expressly in the document.

If the agreement does not meet these requirements, the default rules can apply, and the Court may still consider its terms as one factor. The Act has no general power for a judge to set aside a compliant agreement as unfair, so getting the formalities right matters.

What to do next

Start well before the wedding so neither person feels rushed. A lawyer can confirm how your particular assets are likely to be treated and what the agreement should say.

• List the business interests, shares and expected inheritances you want to address.
• Gather business records, ownership documents and any estate paperwork.
• Each of you should book a lawyer who does not act for the other.
• Make sure the agreement says it continues after the marriage.
• Ask a lawyer or accountant how support, tax and your will fit with the agreement.

Frequently asked questions