Why You Need to Get a Cohabitation Agreement (a.k.a prenup), as told by a Family Law Realist
1. You have unequal assets or debts
What’s mine is yours and what’s yours is mine, except in a separation. If one spouse has significantly more assets or debt at the start of a relationship, it is important to put down on paper how things will be divvied up should the relationship end, as well as the value of each asset when you started living together. Will you be responsible for his business losses? Her student loan? Decide now or the courts will decide for you.
2. You have unequal Income
If you make more money than your spouse, you could be responsible to pay them spousal support if you separate. It could save a lot of stress and legal fees down the road if you both agree now how you will deal with deciding on spousal support in the future.
3. Someone’s parents have contributed to a down payment on a house
Who can afford a house these days?! Very few. It is becoming more and more common to see parents gifting a child money for a down payment. This can become very complicated if a relationship breaks down. Was the gift to both parties? Was the gift only to the parent’s child? Was it to be repaid to the parent? It is better to clarify these details now, instead of when a relationship is over and emotions are running high.
4. You are considering leaving your job to be a stay at home parent
Giving up your career for a period of time to care for the little ones can be an incredibly rewarding choice, but also a financially risky one. If you are at the point where you and your spouse have agreed that you will take on this role, you should consider putting it in writing that your spouse will support you in getting back into the workforce should you separate in the future. Advancing a spousal support claim after you separate can take months and cost thousands- not what you want when you have been left high and dry!
5. To confirm the value of the asset and debt at the start of your cohabitation
In British Columbia, upon separation spouses presumptively are to divide all their assets obtained from the date of cohabitation to the date of separation, and the increase in value to assets owned prior to their relationship. Trying to figure out the value of an asset as of the start of the relationship years later when you are separating can be a mathematical nightmare. Agreeing on a value at the start of your cohabitation can make things significantly easier in the future should you separate.
6. To opt out of obligations such as property division or spousal support and to protect against future changes in legislation.
Under the current Family Law Act there are certain presumptions and obligations regarding asset and debt division and spousal support. These presumptions do not always suit every couple’s situation. The legislation could also change between now and when you separate and you may be on the hook for things you had never imagined!
7. A cohabitation agreement could save you thousands in litigation costs down the road
Future litigation costs will FAR outweigh the cost of having a comprehensive cohabitation agreement prepared now. Because you and your spouse are still in a relationship and getting along, the process of preparing this document is much simpler than trying to divide assets and debts after your relationship breaks down. Take advantage of having a rational mind and set out an agreement.
8. Is this your second marriage? Make sure you protect your assets for your children from your first.
If this is your second marriage and you have children from a previous relationship, you may want to ensure that you protect your assets for the future benefit of your children. You can opt to draft an agreement that stipulates if your new relationship breaks down, your assets are not divided between you and your new spouse, but protected so your children may benefit through your will. Which reminds us, see a lawyer about a will!
9. Forever isn’t always Forever
We’ve all heard the statistics suggesting that close to half of all marriages end in divorce. While few couples think they will be in the half that divorces, many of them will be. You also don’t think that your house will burn down, but you get insurance, right? As I learned in Brownies, the first rule is to be prepared! Or was it to share and be a friend?
Caution: This is not legal advice, and you should not rely on it as such. To ensure your interests are protected, formally seek advice from a lawyer.