Yes, Prenups Are Valid, But You Need to Update Them Over a Longterm Relationship or Marriage
In the legal practice of family law, we are often dealing with couples separating, however we also deal with many couples coming together to plan their lives together. In speaking with my separating clients in this midst of a contentious litigation proceeding, they often ask how they could have avoided being in the adversarial and expensive situation they presently find themselves in. More specifically, the clients wonder how they could have protected certain property from claims against their (now) ex-spouse. When I mention that their entire dispute could have been avoiding with a prenuptial agreement (also known as a “cohabitation agreement” or “marriage agreement”) many of my clients say something like, “yeah but I heard prenups aren’t legally binding”.
This widespread assumption that prenups are invalid is far from the truth. In a 2004 case, the Supreme Court of Canada stated clearly:
“Courts should respect private arrangements that spouses make for the division of their property on the breakdown of their relationship particularly where the agreement in question was negotiated with independent legal advice”
In a more recent case, the British Columbia Court of Appeal stated:
“Marriage agreements are therefore presumed to operate fairly unless shown to be otherwise”
Cohabitation / marriage agreements are an effective and valid way to set out in detail the expectations surrounding such things as finances, property and support. They can be prepared using a standard-form template or a more creative framework to reflect parties’ unique circumstances or expectations.
That being said, these agreements, once entered into, should be updated throughout the spousal relationship to consider and reflect changing circumstances. A lot can change over a 10, 15 or 20 year relationship, and an Agreement executed in your early 30’s may outline a lot different than expectations actioned by spouses over a long-term relationship or marriage.
In a recent precedent-setting British Columbia case, the Court of Appeal was left to decide whether a marriage agreement (cohabitation/prenup) should be upheld post-separation, or whether such a finding would lead to an unfair outcome. In that case, the parties were in a spousal relationship for over 20 years. Early on in that relationship, they entered into a comprehensive agreement that set out the expectations on dividing property if they broke up. Over the course of the relationship, the parties’ property increased in value from a few million dollars to a few hundred million dollars. During that time, despite extreme changes in the parties’ financial circumstances, they did not review or update the original agreement setting out the rights and responsibilities associated with the property they had prior to marriage. When they separated, the application of the agreement provided for a considerable discrepancy in who got what. The court found that by the time the marriage had collapsed, the terms of the agreement no longer reflected the parties’ intentions at the time the agreement had been executed. The court found the “explosive growth” in assets could not have been reasonably contemplated by the parties at the time the agreement was negotiated. As a result, the court ordered reapportionment of property that diverted from the express terms of the parties agreement to effect a more “fair” result in the circumstances.
The above result could have been avoided if the parties reviewed and updated their agreement from time to time to reflect the changing circumstances or maintain their expectations in the event of a separation.
This recent decision reinforces the importance of:
- Having a well-drafted family law agreement with both parties obtaining independent legal advice;
- Having your family law agreement drafted with clear language outlining the your expectations and why, in order to avoid or withstand future scrutiny; and
- Regularly reviewing your family law agreement to ensure they remain fair and/or reflect both parties’ expectations upon considering changes in circumstances over time.
Ryan Kinghorn is a family lawyer at Race & Company LLP and has extensive experience preparing and advising on family law agreements. Email Ryan at r.kinghorn@raceandco.com to discuss your circumstances to determine if an agreement is advisable for you.
