Relationships are complicated at the best of times, so, if a couple decides to split up, untangling the life they’ve built together often gets messy, and fast.
One of the few things that can make a divorce or separation a little bit easier (other than a good counsellor and supportive friends) is a marriage contract or prenuptial agreement.
Safeguarding yourself against a rocky road
Though it’s a less than romantic topic to discuss at the time, by understanding and entering a binding, legal agreement early on in a serious relationship, you can make a possible split remarkably smoother for you and your significant other.
However, it’s a big decision and one you shouldn’t enter into lightly. To help you decide whether a marriage contract or prenuptial is right for your relationship, we’re going to examine:
What they are
Who they work best for
What to be wary of before signing
What is a prenuptial agreement?
Typically when a couple decides to split, the government stipulates that finances at the time of divorce are shared equitably – that is, largely 50/50.
However, for some couples (especially if one partner is significantly wealthier than the other), this is largely unfair. That’s why every couple is legally allowed to make their own agreement that overrides governmental stipulations.
This agreement is called a marriage contract or cohabitation agreement – colloquially known as a prenup.
Prenups: not just for marriages
While we may often refer to these contracts as prenuptial agreements or marriage contracts, the truth is, these contracts don’t only apply to couples getting married – and they also don’t need to happen before a marriage takes place.
Whether you and your significant other choose to get married or cohabitate, these ‘marriage’ agreements can help unravel the potential knot you may find yourself in at the end of a relationship. And, if you are cohabitating and you choose to marry, you won’t need to re-create the agreement. This is because a cohabitation agreement automatically carries over as a marriage contract.
Because a marriage contract is typically referred to as a prenup, inferring it’s to be made before the marriage ceremony, people often believe a couple can only enter into one before their wedding. However, this is not true. Even if you are currently cohabiting, or are already married, you and your significant other may still enter into a legally-binding relationship agreement.
What does a marriage contract cover?
Every union is different, and as such, each marriage contract will be unique. Most marriage contracts tend to cover how finances, investments and real estate will be split up in the event of a divorce.
However, just about any belonging can be included in this agreement, such as a favourite vehicle, the summer cottage or even jewelry. A marriage contract can even include stipulations that dictate how children from the union, or previous unions, may be raised.
What cannot be added to a prenup?
While marriage contracts allow plenty of leeway to stipulate what will happen in the case of a split, there are certain aspects that the government reserves the right to dictate. So, while you can decide to designate access and custody of your children, any court ruling during the separation/divorce will supersede the marriage contract, effectively nullifying that part of the agreement.
That’s why we don’t usually recommend including custody or access in your contract.
A legally-binding agreement
There is a myth out there that marriage contracts are easily sidelined and aren’t legally binding. While this may happen in films, the fact is: all marriage contracts are equally as binding as any other contract.
However, this is true only if you ensure it’s done correctly – which includes:
Putting the agreement down in writing
Obtaining signatures from both parties
Having all signatures witnessed
Ensuring full disclosure for both sides before signing the contract
It also helps when both parties retain their own counsel, as hiring only one lawyer creates an inherent conflict of interest. This can cause problems when or if it comes before a judge.
Alleviating stress during a difficult time
If the worst should happen, such as a divorce, neither party is at their most resilient emotionally or mentally, so that extra pressure of untangling finances and belongings is even more difficult to bear.
This can cause excess stress that can make it a struggle to maintain a healthy relationship going forward – which is especially important if there are children involved.
One of the great strengths of a marriage contract is that it allows both parties to create a coherent and fair plan for the possible end of their relationship – while they are at their strongest mentally and emotionally.
Marriage contracts offer a smoother path forward during a difficult time, helping to mitigate potential conflicts as both parties try to get their due.
The dangers of a prenup
Though marriage contracts are designed to keep both parties of a relationship safe, they aren’t without their own risks.
Some of the major dangers you should be wary of when creating a marriage contract are the compromises you make with your partner.
Not only can the ‘rose-coloured glasses’ of a good relationship cloud your vision and lead you to make uncalled-for compromises, often, the stipulations laid out can have unforeseen consequences down the road.
That’s why it’s important to talk to your financial advisor to decide which items should be included to ensure your marriage contract is fair for everyone involved, along with retaining legal counsel to draft the document.