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Marriage Contracts and Cohabitation Agreements

A marriage contract or cohabitation agreement may be entered into prior to or during marriage or cohabitation, as the case may be. Such an agreement is what people commonly refer to as a “prenup”. It varies the entitlements and obligations otherwise existing at law related to property and/or spousal support.

 

The purpose of a marriage contract or cohabitation agreement depends on the couple. For example, there may be a “single purpose”, such as to exclude the value of certain property from net family property, like a matrimonial home, family business or interest in a family trust. In other cases, spouses will want to make it clear that “what is yours is yours; what is mine is mine”. By no means are these kinds of agreements “one size fits all”. Rather, they are carefully tailored to the circumstances of the parties to the agreement.

 

The usual process for completing a marriage contract or cohabitation agreement is for each of the spouses to retain his/her own lawyer to obtain legal advice about his/her rights and obligations. This advice is called “independent legal advice”. In addition, the spouses must exchange full financial disclosure, so they can knowledgeably negotiate with each other and arrive at terms of agreement. Terms must be meaningfully negotiated, not presented as a fait accompli.

Separation

Property

 

Only married spouses have defined property rights on separation.

 

While courts are increasingly recognizing that common law spouses may have property rights on the breakdown of their relationship, these claims are a matter of costly argument, evidence and the discretion of the court.

 

The property scheme of the Family Law Act treats marriage as a partnership. The first step in resolving property issues is to identify the spouses’ “valuation date”, in most cases, the date the spouses separate and there is no reasonable prospect they will resume cohabitation.

 

The next step is for each spouse to calculate his/ her “net family property”, defined to mean the value of all the property, except for “excluded property”, such as a gift from a third party or an inheritance received during the marriage, that a spouse owns on the valuation date, after deducting,

 

(a) the spouse’s debts and other liabilities, and
(b) the value of property, other than a matrimonial home, that the spouse owned on the date of the marriage, after deducting the spouse’s debts and other liabilities, other than debts or liabilities related directly to the acquisition or significant improvement of a matrimonial home, calculated as of the date of the marriage.

 

The spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.  This payment is known as an “equalization payment”.

 

 

Spousal support

 

There are three conceptual bases for entitlement to spousal support: compensatory, non-compensatory and contractual.

 

Compensatory spousal support compensates a recipient spouse for the economic consequences of the relationship and its breakdown. For example, the division of labour during a marriage may have been that a spousal support recipient has assumed primary responsibility for the care of the children of the relationship and home management, while the support payor has focused on the development and growth of his/her income earning potential.

 

Non-compensatory spousal support is designed to protect the spouse earning the lower income from the loss of access to the total family income after separation.

 

Contractual spousal support will be payable if it is provided for in a contract between the spouses.

 

The Spousal Support Advisory Guidelines (the “SSAG’s”) assist the calculation of the amount and duration of spousal support. The SSAG’s are not law, but they are routinely applied. Two different formulae apply, depending on whether child support is also payable. At very high levels of income, the application of the SSAG’s may become discretionary / may not apply.

 

Under the SSAG’s, spousal support will be indefinite in duration if the length of marriage/cohabitation is more than twenty years or if the number of years of the marriage/cohabitation plus the recipient’s age at separation is equal to or greater than 65. Otherwise, the general rule is that the duration of spousal support is ½ to 1 year for every year of cohabitation and/or marriage, subject to variation and possibly review.

 

Spousal support is, generally, presumed to be payable on a monthly basis. Depending upon the circumstances, however, spousal support may be payable in a lump sum amount.

Matrimonial Home

Only married spouses may have a matrimonial home.

 

The significance of having a matrimonial home is that both spouses have an equal right to possession of it, regardless of ownership. That is, one spouse may legally own the family residence, but, nevertheless, both spouses will be equally entitled to live in it. If a relationship breaks down, the spouse owning the matrimonial home is not entitled to require the other spouse to leave it or to unilaterally change the locks. This entitlement to equal possession can be varied only by court order or agreement.

 

A court order for exclusive possession of a matrimonial home will be granted only in limited circumstances.

Custody and Access

Custody is, essentially, the entitlement to make major decisions related to children on matters such as education, medical treatment, religion, residence and extra-curricular activities.

 

Access includes the right to visit with and be visited by the children and the right to make inquiries and to be given information as to the health, education and welfare of the children.

 

Custody and access disputes are determined solely by reference to the best interests of the children.

 

Due to the particular demands involved in the resolution of child-related issues, the services of a social worker, psychologist or psychiatrist may be of assistance.

 

Sometimes, the court will ask that the Office of the Children’s Lawyer, a law office in the Ontario Ministry of the Attorney General (the “OCL”), become involved. If the OCL agrees, it decides what services it will provide. Services may include acting as the children’s lawyer or conducting an investigation and report and making recommendations to the court on all matters concerning custody of or access to the child and the child’s support and education.

 

Voice (or Views) of the Child Reports are relatively new in Ontario. These reports simply outline the children’s wishes. Such a report may be appropriate where there are older children, and where a full investigation of facts and circumstances is not considered necessary.

Child Support

The entitlement to child support belongs to the children of the relationship, not the parent with whom the children reside.

 

Child support is payable in priority to spousal support.

 

If a child primarily resides with one parent, and is under 18 years of age, the calculation of the basic amount of child support is relatively straightforward. In most cases, the tables of the Child Support Guidelines will determine the amount of child support, solely by reference to the payor parent’s annual gross income.

 

If there is a shared parenting arrangement, parties will often agree on a “set-off” amount, the difference in the amount of child support that each parent would pay the other, if the children had a primary residence with that other parent. The proper analysis is much more complicated. Particular care must be taken with the wording of a set-off child support obligation because of the implications for income tax benefits.

 

When a child is over the age of majority, the table amount of child support may not be appropriate. An example of such a situation is that of a child over the age of 18 who attends a full-time program of education away from home.

 

Often, costs are incurred for a child that are known as “special or extraordinary expenses.” These special or extraordinary expenses may include childcare costs, health-related expenses, extraordinary educational expenses, post-secondary educational expenses or extraordinary expenses for extracurricular activities. Parents usually pay special or extraordinary expenses in proportion to their incomes, after deducting from the expense the contribution, if any, from the child.

Divorce

If a spouse has been ordinarily resident in Canada for at least one year, he/she may initiate a divorce proceeding by claiming a breakdown of a marriage. The three alternative grounds for a divorce are as follows:

 

(a) one year of living separate and apart, the ground most often relied upon;
(b) adultery; or
(c) cruelty.

Marriage Contracts and Cohabitation Agreements

A marriage contract or cohabitation agreement may be entered into prior to or during marriage or cohabitation, as the case may be. Such an agreement is what people commonly refer to as a “prenup”. It varies the entitlements and obligations otherwise existing at law related to property and/or spousal support.

 

The purpose of a marriage contract or cohabitation agreement depends on the couple. For example, there may be a “single purpose”, such as to exclude the value of certain property from net family property, like a matrimonial home, family business or interest in a family trust. In other cases, spouses will want to make it clear that “what is yours is yours; what is mine is mine”. By no means are these kinds of agreements “one size fits all”. Rather, they are carefully tailored to the circumstances of the parties to the agreement.

 

The usual process for completing a marriage contract or cohabitation agreement is for each of the spouses to retain his/her own lawyer to obtain legal advice about his/her rights and obligations. This advice is called “independent legal advice”. In addition, the spouses must exchange full financial disclosure, so they can knowledgeably negotiate with each other and arrive at terms of agreement. Terms must be meaningfully negotiated, not presented as a fait accompli.

Separation

Property

 

Only married spouses have defined property rights on separation.

 

While courts are increasingly recognizing that common law spouses may have property rights on the breakdown of their relationship, these claims are a matter of costly argument, evidence and the discretion of the court.

 

The property scheme of the Family Law Act treats marriage as a partnership. The first step in resolving property issues is to identify the spouses’ “valuation date”, in most cases, the date the spouses separate and there is no reasonable prospect they will resume cohabitation.

 

The next step is for each spouse to calculate his/ her “net family property”, defined to mean the value of all the property, except for “excluded property”, such as a gift from a third party or an inheritance received during the marriage, that a spouse owns on the valuation date, after deducting,

 

(a) the spouse’s debts and other liabilities, and
(b) the value of property, other than a matrimonial home, that the spouse owned on the date of the marriage, after deducting the spouse’s debts and other liabilities, other than debts or liabilities related directly to the acquisition or significant improvement of a matrimonial home, calculated as of the date of the marriage.

 

The spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.  This payment is known as an “equalization payment”.

 

 

Spousal support

 

There are three conceptual bases for entitlement to spousal support: compensatory, non-compensatory and contractual.

 

Compensatory spousal support compensates a recipient spouse for the economic consequences of the relationship and its breakdown. For example, the division of labour during a marriage may have been that a spousal support recipient has assumed primary responsibility for the care of the children of the relationship and home management, while the support payor has focused on the development and growth of his/her income earning potential.

 

Non-compensatory spousal support is designed to protect the spouse earning the lower income from the loss of access to the total family income after separation.

 

Contractual spousal support will be payable if it is provided for in a contract between the spouses.

 

The Spousal Support Advisory Guidelines (the “SSAG’s”) assist the calculation of the amount and duration of spousal support. The SSAG’s are not law, but they are routinely applied. Two different formulae apply, depending on whether child support is also payable. At very high levels of income, the application of the SSAG’s may become discretionary / may not apply.

 

Under the SSAG’s, spousal support will be indefinite in duration if the length of marriage/cohabitation is more than twenty years or if the number of years of the marriage/cohabitation plus the recipient’s age at separation is equal to or greater than 65. Otherwise, the general rule is that the duration of spousal support is ½ to 1 year for every year of cohabitation and/or marriage, subject to variation and possibly review.

 

Spousal support is, generally, presumed to be payable on a monthly basis. Depending upon the circumstances, however, spousal support may be payable in a lump sum amount.

Matrimonial Home

Only married spouses may have a matrimonial home.

 

The significance of having a matrimonial home is that both spouses have an equal right to possession of it, regardless of ownership. That is, one spouse may legally own the family residence, but, nevertheless, both spouses will be equally entitled to live in it. If a relationship breaks down, the spouse owning the matrimonial home is not entitled to require the other spouse to leave it or to unilaterally change the locks. This entitlement to equal possession can be varied only by court order or agreement.

 

A court order for exclusive possession of a matrimonial home will be granted only in limited circumstances.

Custody and Access

Custody is, essentially, the entitlement to make major decisions related to children on matters such as education, medical treatment, religion, residence and extra-curricular activities.

 

Access includes the right to visit with and be visited by the children and the right to make inquiries and to be given information as to the health, education and welfare of the children.

 

Custody and access disputes are determined solely by reference to the best interests of the children.

 

Due to the particular demands involved in the resolution of child-related issues, the services of a social worker, psychologist or psychiatrist may be of assistance.

 

Sometimes, the court will ask that the Office of the Children’s Lawyer, a law office in the Ontario Ministry of the Attorney General (the “OCL”), become involved. If the OCL agrees, it decides what services it will provide. Services may include acting as the children’s lawyer or conducting an investigation and report and making recommendations to the court on all matters concerning custody of or access to the child and the child’s support and education.

 

Voice (or Views) of the Child Reports are relatively new in Ontario. These reports simply outline the children’s wishes. Such a report may be appropriate where there are older children, and where a full investigation of facts and circumstances is not considered necessary.

Child Support

The entitlement to child support belongs to the children of the relationship, not the parent with whom the children reside.

 

Child support is payable in priority to spousal support.

 

If a child primarily resides with one parent, and is under 18 years of age, the calculation of the basic amount of child support is relatively straightforward. In most cases, the tables of the Child Support Guidelines will determine the amount of child support, solely by reference to the payor parent’s annual gross income.

 

If there is a shared parenting arrangement, parties will often agree on a “set-off” amount, the difference in the amount of child support that each parent would pay the other, if the children had a primary residence with that other parent. The proper analysis is much more complicated. Particular care must be taken with the wording of a set-off child support obligation because of the implications for income tax benefits.

 

When a child is over the age of majority, the table amount of child support may not be appropriate. An example of such a situation is that of a child over the age of 18 who attends a full-time program of education away from home.

 

Often, costs are incurred for a child that are known as “special or extraordinary expenses.” These special or extraordinary expenses may include childcare costs, health-related expenses, extraordinary educational expenses, post-secondary educational expenses or extraordinary expenses for extracurricular activities. Parents usually pay special or extraordinary expenses in proportion to their incomes, after deducting from the expense the contribution, if any, from the child.

Divorce

If a spouse has been ordinarily resident in Canada for at least one year, he/she may initiate a divorce proceeding by claiming a breakdown of a marriage. The three alternative grounds for a divorce are as follows:

 

(a) one year of living separate and apart, the ground most often relied upon;
(b) adultery; or
(c) cruelty.

Resolving Family Conflict
With Dignity