Prenuptial Agreement

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windr
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Prenuptial Agreement

Post by windr »

Daughter and son in law who are currently living and married in the Netherlands would like to return to Canada in the near future and want to know whether their prenuptial agreement will protect property during the marriage in the event of a bankruptcy.

Apparently in the Netherlands the prenuptial agreement not only provides for the event of a divorce but is also drawn up to protect assets (property) during the marriage, in the event of a bankruptcy.

If this not be the case in Canada, how can they set up a business so as to protect assets during the marriage, should the venture fail.

Thanks in advance for your input.
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Re: Prenuptial Agreement

Post by ockham »

In which province in Canada will they be living?

Bankruptcy law is under federal jurisdiction. Marital property division law is under provincial jurisdiction. Creditors'/debtors' rights law typically is under provincial jurisdiction. You have a prenuptial agreement made in Netherlands, prepared one presumes in contemplation of the applicable law in Netherlands. This has the makings of a law school examination question.

Best to engage the services of a lawyer in the province in which they will be residing to review the prenup agreement and provide an opinion. Figuring out what a prenup means is difficult even before you start shopping it across provincial or national borders.
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Re: Prenuptial Agreement

Post by windr »

ockham wrote:In which province in Canada will they be living?
They plan to live in Ontario.

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Re: Prenuptial Agreement

Post by OhGreatGuru »

To repeat ockham's recommendation, I think you will have to see an Ontario lawyer.

My guess is that a Canadian court would recognize those parts of the agreement that are within the scope of a normal Canadian pre-nup. But because of the possible ambiguity your lawyer will probably advise having a new one written up.

I have no idea how you should handle the business bankruptcy issue. Better get legal advice on this. I don't think it is usually done through a pre-nup. I doubt the Netherlands pre-nup would serve the purpose here.
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Re: Prenuptial Agreement

Post by bowtie »

windr wrote: If this not be the case in Canada, how can they set up a business so as to protect assets during the marriage, should the venture fail.
Depending on the nature of the business, they can incorporate a company or form a limited liability partnership.
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Re: Prenuptial Agreement

Post by 83_gemini »

The best way is certainly to consult an Ontario lawyer and prepare a new pre-nup.

There are ways to shelter assets from bankruptcy (there are usually ways to do most anything). You might need one lawyer to do up the pre-nup and another to deal with the corporate/insolvency side.

Do you know a lawyer or two you trust? I could refer you to my employer since I work for a law firm (I practice litigation and know little about these particular things, beyond what I did in law school) that could deal with the corporate side of things (we don't really have a dedicated family law practice though I suspect this could be dealt with). What are your costs expectations in throwing this together (i.e. do you find a sole practitioner who could do both; do you go to a firm with specialists?) I would note that depending on the situation there might be a need to consult a lawyer in the Netherlands; if they own property there, for instance, or have ongoing business interests on that side of the pond.

Finally with regard to business strategy there is some merit (if the D and SiL are serious about the business) in consulting with a solicitor at the beginning to get advice they can "grow with" and use as a point person to deal with the various issues that will come up (such as estates issues, with are really a corollary to the pre-nup) and as someone who can point them to other counsel when necessary. Who this person is varies, but ultimately depends on who they are comfortable dealing with.
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Re: Prenuptial Agreement

Post by optionable68 »

A man and woman decide to move in together but neither wants to get married. They do not have children nor do they plan to have any children.

Her income is approx 4x his income.

Her investment assets are approx 5x his assets.

Neither have any outstanding debt obligations.

She wonders if she should consider a "Cohabitation Agreement" in the event the relationship possibly terminates unexpectedly.

Her initial thought was "absolutely a Cohabitation Agreement makes sense", but then after some time with Google, she discovers that "Common-law" relationships which terminate have less rigid legal guidelines than for couples who legally get married.

Example: For a common-law couple living in Ontario (in excess of 3 years), in the event the relationship terminates, the home they live in and its contents are divided based on the individuals total cash contribution (i.e. if the woman purchased the home in cash and in full, she would not have to divide the home or its gain/loss in value with the man... its all hers since she paid for it)

Her 2 primary concerns are 1) separation of investment assets and 2) not wanting to have any potential liability regarding spousal support payments. She loves her man but she recognizes the statistical fail ratio in relationships and she wants to take the emotion out of it to make sure she is financially protected.

Questions:

1/ Would the spouse with the "materially higher" income be liable for support in a common law relationship?

2/ Would the spouse with the "materially lower" investment portfolio have any legal rights to the gains on his spouses investment portfolio or investment gains she earned during the cohabitation?

3/ In a situation like this, is it sensible to have that difficult discussion with her man and draw up a "cohabitation” or "common law” agreement?
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Re: Prenuptial Agreement

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optionable68 wrote:Questions:

1/ Would the spouse with the "materially higher" income be liable for support in a common law relationship?

2/ Would the spouse with the "materially lower" investment portfolio have any legal rights to the gains on his spouses investment portfolio or investment gains she earned during the cohabitation?

3/ In a situation like this, is it sensible to have that difficult discussion with her man and draw up a "cohabitation” or "common law” agreement?
I, too, may be going down this path some day with me on the 'materially higher' end of things. We have discussed cohabitation agreements as well and I've done research on them (AB and BC). Each province handles things a bit differently. My take to your questions based on my reseach is:

1. Don't call it a 'common law' relationship. Call it simply cohabitation. Technically, as I read it, there is no exposure for the person with the 'materially higher' income to be liable for support in a cohabitation arrangment. But some legal discussion on the Internet says that can be a bit of a grey area, and it depends on how the 2 people conduct their lives. Example: It is best for each to keep their own bank accounts, but contribute essentially equally to a joint bank account (and perhaps credit card) for normal day to day living expenses, even including minor house maintenance. But keep other personal expenses separate. To the extent, there is additional money spent as part of one's living standards.... one example: The higher end person may pay for all vacations, but the portion that is otherwise the other person's share be considered as a gift. The same for concert tickets, clothes, a new vehicle, etc. In other words, these are 'one off' gifts and the lower income person cannot claim an expectation or certainty of ongoing 'support'. Keep all receipts to back up the lifestyle. The issue is to avoid the appearance, if not actual, disproportionate continuous and ongoing funding.... so the lower income spouse cannot sue for support to keep him/her in the lifestyle to which he/she has come to expect.

2. My understanding is No. Property rights do not grow commingling roots but I'd be sure to make sure each person pays their own income taxes to avoid tentacles. In some (maybe all) provinces, that is technically also true for the principal residence, but may be harder to reinforce especially if major maintenance, furniture, etc. is paid out a joint account or credit card. Joint undivided actions can be seen as an 'understanding' of joint undivided ownership. It is important in a principle residence to structure the title right (if there is disproportionate funding) and to have a breakup agreement about how each gets their money out (the simplest being the house shall be sold within X months at fair market value as determined by a RE professional).

3. Absolutely have that discussion. I would assert this discussion should not need to be difficult if the relationship is good. Both parties 'should' be wanting to protect their own interests, beneficiaries, etc, etc. My SO and I have not yet discussed the gritty details but we have discussed and agreed on the fundamentals SHOULD we decide to cohabitate together in the future. I'd also engage a lawyer to draw up the actual agreement. Don't be penny wise and pound foolish.

Caution: IANAL and the above is only my opinion. Your friend might be well served to a lawyer briefly on key points/issues, even before discussing with her SO.
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Re: Prenuptial Agreement

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Questions:

1/ Would the spouse with the "materially higher" income be liable for support in a common law relationship?

2/ Would the spouse with the "materially lower" investment portfolio have any legal rights to the gains on his spouses investment portfolio or investment gains she earned during the cohabitation?

3/ In a situation like this, is it sensible to have that difficult discussion with her man and draw up a "cohabitation” or "common law” agreement?
Regarding 1 & 2, the traditional answer has been no, at least in most provinces. Common-law spouse could be made liable for child support, but not alimony; and common-law spouse had no automatic entitlement to property. But the laws are constantly changing, and usually to extend more and more rights to the financially disadvantaged spouse. It usually begins with sharing of any financial or property assets acquired during the "marriage", and by extension this might possibly include growth on investments. Most couple's largest single asset is their house, and it usually increases with time. What about pensions or RRSPs earned during the period of cohabitation?

3. YES. In today's day and age this is sensible advice. And it is particularly so if partners have significantly different assets & earning power. Unfortunately I believe many provincial bar associations now require each partner to have a separate lawyer, as otherwise they believe there is a perceived conflict of interst. It is typical of the legal profession to look at this as an adverserial contract rather than a mutual agreement.
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Re: Prenuptial Agreement

Post by NormR »

OhGreatGuru wrote:Common-law spouse could be made liable for child support, but not alimony;
The child support is an important point if children come attached from previous relationships. They count in such determinations.
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Re: Prenuptial Agreement

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OhGreatGuru wrote:Unfortunately I believe many provincial bar associations now require each partner to have a separate lawyer, as otherwise they believe there is a perceived conflict of interst. It is typical of the legal profession to look at this as an adverserial contract rather than a mutual agreement.
The "family" lawyer can advise both spouses if they sign a waiver that relieves the lawyer of liability that might arise from this conflict of interest.
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Re: Prenuptial Agreement

Post by brucecohen »

Here is the Ontario Attorney General's "cohabitation for dummies" booklet.
1. No asset equalization on breakup. (FYI, this was decided by the Supreme Court of Canadaa in a Nova Scotia case about a decade ago)

2. If the couple has been together for at least three years and breaks up, one partner can seek support from the other. Whether he/she gets it appears to rest on the issue of need.

Note: Does either party have a registered pension plan or LIRA? If so, see what the governing legislation says about the beneficiary when the plan member/LIRA holder dies. The federal legislation, for example, makes the common law spouse the beneficiary no matter who was previously designated. I think that's if the couple has been together at least three years, but don't fully recall. I think the provincial acts are similar, but don't remember and right now am too lazy to look it up.
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Re: Prenuptial Agreement

Post by ig17 »

NormR wrote:
OhGreatGuru wrote:Common-law spouse could be made liable for child support, but not alimony;
The child support is an important point if children come attached from previous relationships. They count in such determinations.
Can cohabitation agreement override this?
brucecohen wrote:2. If the couple has been together for at least three years and breaks up, one partner can seek support from the other. Whether he/she gets it appears to rest on the issue of need.
Same question. Can cohabitation agreement override this?
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Re: Prenuptial Agreement

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ig17 wrote:
NormR wrote:
OhGreatGuru wrote:Common-law spouse could be made liable for child support, but not alimony;
The child support is an important point if children come attached from previous relationships. They count in such determinations.
Can cohabitation agreement override this?
No idea, I just know someone who is paying child support (not his kids) after a cohab. One might wryly observe that the government discourages folk from dating single moms and the poor.
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Re: Prenuptial Agreement

Post by ig17 »

NormR wrote:One might wryly observe that the government discourages folk from dating single moms and the poor.
Dating is safe, I suppose. It's moving together that can kill you (financially).
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Re: Prenuptial Agreement

Post by Flights of Fancy »

basic link on non-biological parents and child support:

http://www.wparker.com/cases/nonbiologicalparents.htm
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Re: Prenuptial Agreement

Post by AltaRed »

At the same time, we have to assume from the OP's post that there is no child support involved in his (Optionable68's) question.

The bigger question is the issue raised in point 1, i.e. 'spousal support', should the relaionship break down. Bruce's response is: possibly yes, in Ontario, and I think that is a risk also in other provinces. That might be coverable (or at least reinforced) in a cohabitation agreement so that a judge would see the 'intent of the cohabitation' and rule accordingly in a split, but one would need to visit a lawyer to be more sure. I know I would put that in a cohabitation agreement. FWIW, I would also put in a cohabitation agreement that any income from pensions, or investment cap gains/losses (or income) generated by the investment portfolio is also not divisable.

Added: The following are AB specific, but may be of interest:
http://www.dynamiclawyers.com/cohabitat ... part-1/29/
http://www.dynamiclawyers.com/common-la ... issues/29/
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Re: Prenuptial Agreement

Post by ig17 »

Challenging a Cohabitation Agreement - Ontario
http://www.dynamiclawyers.com/ontario-c ... eement/16/

My impression after reading this link: the 'poor' party has a lot of wiggle room to challenge the Cohabitation Agreement in general, and the waiver of support payments in particular.
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Re: Prenuptial Agreement

Post by newguy »

There's also a famous case in Quebec which has no deemed co-habitation or whatever you call it, even after 20+ years and with kids (ie. my situation). Guy Laliberte was sued for spousal support (like the 50k / month for the kids wasn't enough). I don't remember how it turned out.

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Re: Prenuptial Agreement

Post by optionable68 »

Thanks to all for your insights.

Seems to be a lot of grey areas with or without a co-habitation agreement. :?
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Re: Prenuptial Agreement

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I'd never consider going into such a relationship without a cohabitation agreement. One other thing not really mentioned upthread. The mere discussion and negotiation of such an agreement would/should flush out any ulterior motives... if not words, by body language.
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Re: Prenuptial Agreement

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AltaRed wrote:I'd never consider going into such a relationship without a cohabitation agreement. One other thing not really mentioned upthread. The mere discussion and negotiation of such an agreement would/should flush out any ulterior motives... if not words, by body language.
Very true. One "friend" married someone recently in a hurry (due to the "get it or lose it" spousal pension), asked me if her children can keep the new husband's house when they are gone, I asked: how about his children? She is a very good looking lady, but the body language to my question was not pretty.

Things were so simple when we (were younger and) had no money ... Money and money, one cant live without it, but too much may not be good either ... :wink:
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Re: Prenuptial Agreement

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Bylo Selhi wrote:
OhGreatGuru wrote:Unfortunately I believe many provincial bar associations now require each partner to have a separate lawyer, as otherwise they believe there is a perceived conflict of interst. It is typical of the legal profession to look at this as an adverserial contract rather than a mutual agreement.
The "family" lawyer can advise both spouses if they sign a waiver that relieves the lawyer of liability that might arise from this conflict of interest.
Is there a website or referral agency that lists/advertises/ranks family lawyers for those in Ontario ?
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Re: Prenuptial Agreement

Post by twa2w »

Try the Upper Canada law society. They have a search feature where you can locate liers by area of practice. Be aware that some lawyers in sole practices and smaller partnerships may practice in most areas of law esp in small towns.

http://www2.lsuc.on.ca/LawyerParalegalD ... rchPage.do
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