Who Needs a Prenuptial Agreement in Ontario?

Many people assume a prenuptial agreement is only for the wealthy. In Ontario the real question is different: do the default rules that apply when a marriage ends fit your situation, or would you rather set your own terms in advance?

This article walks through the situations where a marriage contract commonly helps, such as a second marriage, an inheritance, a business or a high income. It also explains what a contract can and cannot cover. It is general information, not legal advice about your own circumstances.

What a prenup is called and what it does in Ontario

The Ontario government describes a marriage contract as a legal document signed by couples before they marry to protect their rights if they split up, including rights to property. People usually say prenup or prenuptial agreement, but the legal term is marriage contract.

A marriage contract or cohabitation agreement can cover support, property division and who moves out on separation. It cannot decide who has decision-making responsibility or parenting time for the children. Couples who live together without marrying can sign a similar document called a cohabitation agreement.

Once the contract is signed, it must be followed. If the spouses separate and disagree about it, a judge may need to decide.

The default rules a prenup would replace

To decide whether you need a contract, it helps to know what happens without one. For married spouses, property acquired during the marriage must be split equally when the marriage ends for any reason, and courts can divide differently only in very special situations.

The calculation works like this. You subtract debts and excluded property from the property each spouse owns on separation, then do the same for the date of marriage. A negative result counts as zero. The larger share minus the smaller share, divided by two, is the equalization payment.

Common-law couples are treated differently. They are not legally required to split property acquired while living together, and household items and other property belong to the person who bought them. Someone who contributed to property the other partner owns may have a right to part of it, but may have to go to court if the other partner will not agree to repay the contribution.

Situations where a marriage contract often helps

• Second or later marriage. You may want to keep certain property separate for yourself or for children from an earlier relationship. A contract is the tool for setting those terms, because the default rules apply equal sharing of property acquired during the marriage.
• Expecting an inheritance, or already holding one. Inherited property other than the family home is excluded property in the equalization calculation. 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.
• Owning a business or significant assets before the wedding. The calculation compares your property at the date of marriage with your property at separation. How a particular business or investment would be treated depends on the facts, so it is worth confirming with a lawyer or accountant.
• High income or a large income gap. A contract can address support, but support terms raise their own questions, covered in a separate article on spousal support waivers.
• Moving in together before or instead of marrying. A cohabitation agreement lets common-law partners set terms that the default rules would not give them.

If none of these apply and you are comfortable with equal sharing of property acquired during the marriage, you may reasonably decide a contract is not necessary. It is a choice, not a requirement.

What makes a contract hold up

Both spouses must sign the marriage contract in front of a witness, and the witness must also sign. Any later change must also be in writing and witnessed. In one Court of Appeal for Ontario case about a cohabitation agreement, a later informal arrangement that was not in writing, signed and witnessed did not amend the agreement.

Ontario's guidance advises that each partner use a different lawyer and that the partners exchange financial information before signing. This matters because a court may set aside a contract or a provision in it if a party failed to disclose significant assets, debts or other liabilities that existed when it was made, if a party did not understand its nature or consequences, or otherwise under the law of contract.

Even when one of those circumstances is shown, a court then decides whether to exercise its discretion to set the agreement aside. That is why open disclosure and proper advice at the start are the best protection for both people.

What to do next

• Write down what you each own and owe now, including business interests, savings, pensions and any expected inheritance.
• List what you want to protect and why, such as a business, a family property or assets for children from a prior relationship.
• Share your financial information openly with your partner before anything is signed.
• Each of you should speak with a different lawyer.
• Allow enough time before the wedding so that neither person feels rushed.
• Sign in front of a witness who also signs, and keep any later change in writing and witnessed.

A lawyer can tell you how the default rules would apply to your specific property and whether a contract fits your goals.

Frequently asked questions