19 Dec Cohabitation/ Prenuptial Agreements: Is it worth the awkward conversation?

Posted at 17:55h in News & Insights by

The short answer is, yes.

What is a Prenuptial/ Cohabitation Agreement? 

A prenuptial or cohabitation agreement is a legal contract between spouses (or individuals prior to becoming spouses) that outlines the financial expectations in the event a couple parts ways.  A well drafted agreement offers several benefits and can result in decreased levels of conflict and significantly lower legal fees should a relationship breakdown.

In British Columbia, couples will be considered “spouses” under the Family Law Act once they have been residing together for 2 years. Once this threshold is crossed, property rights are crystallized and are equivalent to the rights that married individuals enjoy.

If a couple is living together, then they may enter into a Cohabitation Agreement. If a couple is engaged to be married, then they may want to enter into a Prenuptial Agreement. In both cases, the terms of the Agreement will likely be similar.

 

In what circumstances should couples explore entering into a Cohabitation or Prenuptial Agreement?

  • Significant financial disparity between the individuals
  • Protection of a significant asset, such as a business, pension or property
  • Protection of an asset owned with third parties
  • Protection of an inheritance, family trust or gift from third parties
  • Expectation of one, or both, spouses receiving an inheritance or gifts from third parties
  • Protection of assets intended to be gifted to adult children in the future
  • Protection against expected or unexpected liabilities (ie – a regretful investment, student loans)

 

What are the benefits to entering into this type of Agreement?

  • Clarified expectations in the event of a relationship breakdown
  • Securing assets and growth in equity
  • Protection against debts and liabilities
  • Addressing expectations surrounding spousal support

 

Important Considerations 

  • Significance of exchanging financial disclosure
  • Obtaining independent legal advice
  • Drafting an agreement that is fair and in line with the objectives of the Family Law Act
  • Ensuring that neither party is under duress or undue pressure
  • Understanding a client’s, and the couple’s, goals and objectives in order to ensure that an agreement adequately addresses the specific issues at hand.

 

What is the cost associated with a Cohabitation or Prenuptial Agreement?

The baseline fee for drafting and executing this type of agreement is approximately $2,000 (plus GST), however the cost will increase depending on the complexity of the issues that need to be addressed and the amount of negotiation involved.

The laws in British Columbia are often changing, which is why it is important for both spouses to receive independent legal advice prior to signing an agreement.

The lawyers at YSM Family Law are happy to provide more information and to discuss whether or not a Cohabitation Agreement or Prenuptial Agreement will best meet your needs.