Why a prenuptial agreement is a good idea

Q. I’m 34 years old and have been dating my girlfriend, who’s 10 years younger, for two years. I’m considering proposing marriage to her in the near future. We both have decent incomes, but due to our age gap and different family backgrounds, my net worth is significantly higher.

In case of a divorce, how would the following assets get divided in Ontario?

  • Stock portfolio currently worth $100,000
  • Condo acquired before marriage
  • 50% ownership in a service business (assuming no salary or profit distribution during the marriage)
  • Future inheritance of a rental property with income, in Europe
  • Proceeds from the sale of a house in Europe (another future inheritance)

I would most likely get legal consultation to prepare a prenuptial agreement, but would greatly appreciate some initial advice on the asset division.

A. Thanks for your question, Michael. In Ontario, a prenuptial agreement is the best way to protect premarital assets under any circumstances.

You mentioned a large gap in age between you and your partner, but have not said whether or not there were any previous marriages or children. Like a will, a prenup is meant to secure the question of all pre-existing assets for both parties.

It’s important to know that some assets become matrimonial under the law once you become married, and if those were excluded under a prenup, they might be challenged in the future. The matrimonial home would be an example of this: If you eventually live together in the condo you’ve mentioned as husband and wife, the condo will be considered a matrimonial home, despite the fact that you acquired it prior to marriage.

But any assets existing prior to the marriage may be excluded property if not commingled during the marriage. I would caution you to keep extremely good records of any equity assets you are bringing into the relationship.

Also keep in mind that future inheritances of any type, if not commingled, are not considered matrimonial assets.

Studies have shown that discussing these issues and dealing with them in advance of marriage is the best way to protect you and your future spouse from disappointment and fights, later on, should the marriage not work out. So, it’s always a good idea to have a third party mediate this discussion between you and your partner. If you have a financial planner with the skills to do this for you, they can help you prepare a document that could go to your lawyer outlining your assets for exclusion. This should go a long way towards giving you and your partner the transparency you need to make your future marriage a long and happy one.

Debbie Hartzman is a Certified Financial Planner, a Chartered Life Underwriter and Certified Divorce Financial Analyst in Kingston, Ont. She is also the author of Divorce is not easy, but it can be fair.



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