The Importance of a Domestic Contract Later in Life

Happily ever after sign, representing the importance of domestic contracts later in life

Marrying or living with someone later in life can mean there is a significant disparity in assets. This makes it crucial to ensure everyone is protected in the event of a separation, divorce, or death. The best protection is writing either a cohabitation agreement or marriage contract (often referred to as a pre-nuptial agreement or prenup).

What is a cohabitation agreement or marriage contract?

Marriage contracts and cohabitation agreements share some similarities. They are both domestic contracts. They both say what happens if the couple separates, divorces, or dies with regards to similar topics including property. Like other contracts, as long as both parties agree, changes can be made.

Cohabitation Agreement for Couples Living Together

A cohabitation agreement is entered into by two people who are or intend to cohabit but not marry. If a cohabitation agreement is created and the parties later marry, the cohabitation agreement is then considered a marriage agreement.

Marriage Contract for Married or Soon-to-be-Married Couples

A marriage contract is entered into by two people intending to marry or are already married. These are commonly referred to as pre-nuptial agreements or prenups.

What can be included within a domestic contract?

Both marriage contracts and cohabitation agreements can cover similar topics. Couples can create a contract that is specific to them instead of using default standards. The following areas may be included:   

  1. Ownership and division of property. This does not just cover real estate. It also includes any family heirlooms or other physical items. Financial agreements may also be made like agreeing to keep finances separate.
  2. Support obligations. This includes eligibility or payout terms regarding spousal support.  
  3. Decision-making ability regarding the education and moral training of children. A couple can specify a school or religious training.
  4. Other affairs. This is a catchall term, which allows a couple to include terms that may not fall directly into one of the above categories. However, the rules of what cannot be agreed to still apply.

What cannot be included within a domestic contract?

Decision-making and parenting time of children cannot be included in either type of domestic contract. Domestic contracts are predetermining what happens if the relationship does not work out. A child’s best interest cannot be predetermined, which is what decision-making and parenting time are based on.

There is also one exception with marriage contracts only. Once a couple is married, the Family Law Act states that each spouse has an equal right to possess the matrimonial home. A spouse’s entitlement to the matrimonial home, cannot be contracted out of by way of a marriage contract.  

Why is a Domestic Contract important for relationships later in life?

When you are in relationships later in life, usually one or both will be already retired or soon-to-be-retired. One or both people may also have fully grown children. One person in the couple may also need caretaking. One or both may also have had time to accumulate significant assets or debts. The property where the couple will be living together may have come from a previous relationship. All of these are reasons make it important for a domestic contract to be written for either a married or cohabiting couple. 

Domestic contracts can cover what happens to property and support upon the death of a spouse. These issues may also be discussed in greater depth in wills. A domestic contract may be used as a tool to validate a will’s terms. It demonstrates the parties’ intent by stating a child may receive the majority of the estate. Intent becomes important especially on the death of a spouse.

A death in a retirement marriage could cause problems after the fact between surviving adult children and the surviving spouse. The adult children may have their own interpretation of a will or their parent’s intent, which might not match the surviving spouse. A domestic contract would be useful to show intent in conjunction with the will.

Domestic contracts can also allow for clear direction on the couple’s finances. Having documentation for how the couple will pay for joint expenses, can help avoid problems in the relationship down the road.

Why is a Domestic Contract important for cohabiting couples?

Cohabiting couples do not have the same legislative property protections that married couples do. You own what you brought into the relationship. In other words, the person whose name is listed as an owner owns the house. The other spouse will not have a claim to it. A domestic contract can give a cohabitant property protection, like being entitled to half of the property’s increased value from when the couple started living together.

Further, in the Family Law Act, a cohabitant is only entitled to spousal support on the dissolution of the relationship after three years of living together. A domestic contract can alter this, providing a cohabiting spouse with support even if the cohabiting relationship does not last three years.

What Makes a Domestic Contract Legally Binding?

To make either a marriage contract or a cohabitation agreement enforceable it needs to be in writing, signed by the parties and witnessed. Independent legal advice is also important for both parties to obtain. An agreement can be challenged in court because independent legal advice was not received. It is also important that both sides fully disclose their finances. Any assets or debts at the time of making the agreement need to be clearly communicated. Both parties also need to understand the contract and the consequences of it. This also applies to any changes that are made to the agreement. It should also be noted that a court could invalidate a domestic contract if it is extremely unfair.

Cohabitation agreements and marriage contracts are important documents for any couple, but especially those later in life. They can help avoid legal fights after the dissolution of a marriage or cohabitating relationship by clearly laying out what happens. It also provides financial guidance during the relationship.

Be sure to strongly consider whether you should get either a cohabitation agreement or marriage contract before taking the next step with your significant other.

For Advice on Negotiating Domestic Contracts, Contact Bortolussi Family Law in Vaughan

If you have any questions about a cohabitation agreement or marriage contract please contact the knowledgeable family law lawyers at Bortolussi Family Law at 416-987-3300 or contact us online.

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