Common-law, Marriage & Prenuptial Agreements
Romantic relationships influence a persons financial situation more than probably any other life decision except career choice. Hopefully this influence is positive, but it can also be negative. For this reason, while finance alone may not guide these decisions, it is important to be educated on them.
For a lot of people in relationships, moving in together often comes before marriage. This will typically result in the couple becoming common-law partners (also known as adult interdependent partners) after a period of time. Provinces have different timeframes and other rules like whether a child is involved or not that help define this. To learn when you become common-law partners, it would be best to check your provincial government website. As time goes on, legislation is making common-law partnership become more and more equivalent to marriage. The biggest difference between the two is that you can become a common-law partnership without even knowing.
So for people who do end up married or in common-law relationships, how does this effect finances? If the relationship ends there is:
-A division of assets/debts (even if you had them before the relationship)
-Possible alimony payments
-Possible child support payments.
At the end of a marriage or common-law partnership, all assets are split 50/50 despite who had what before the relationship began. If one partner has a notably higher salary than the other, they can be forced to make alimony payments to their ex-partner after the relationship ends as well. Finally, if children are involved, child support payments could be issued depending on the situation. While child support payments cannot be avoided, dividing assets and alimony can be pre-negotiated before entering a marriage or common-law partnership. This is done through the use of a prenuptial agreement.
A prenuptial agreement, often known as a prenup, is a contract between partners in a relationship that states things like how assets will be divided or what/if alimony payments are required. What can and cannot be included in a prenup varies by province. Each partner requires separate legal representation to complete a prenup and this will be the best time to have any questions that you might have answered. Should everyone enquire about a prenuptial agreement before marriage or common-law partnership, even if they are bringing less to the relationship than their partner? Yes. Things may be great when beginning a relationship and you could 100% believe you will be together forever, but divorce rates show this is really just slightly better than a flip of a coin. A prenup can be as simple as stating that each partner gets to keep the assets/debts they brought to the relationship or as complicated as you want it to be. There is no other scenario where you would agree to give away half of your stuff (or accept half of someone else’s debts), this should be no different. Even if you or your partner don’t currently own anything, there are other terms that could be beneficial to have pre-negotiated in the event of a break-up. “But planning for a break-up at the start is damaging to the relationship” No it is not and this is a terrible argument against prenups. Pretty much any competent business partnership begins with a similar agreement, does it doom those too? No. Its being responsible and planning for the future. The most important thing to note is that you are making a contract with your partner though, not a business partner. That means you aren’t trying to negotiate to get the most out of it, that would be unhealthy for your relationship. You should be aiming for fair and even be willing to give a little.