What marriage contracts or cohabitation agreements cannot do

June 26th, 2012 by

A previous blog discussed the many benefits to having a marriage contract or cohabitation agreement. That blog described how couples can have certainty in their lives, if they are married through a marriage contract, or if they are living together through a cohabitation agreement. There are many ways that they can set up their lives to be better than they would be if the couples stayed under the provisions of the Family Law Act, or went to court to resolve the matters between them.

However, the law prohibits marriage contracts from doing eight important things:

1.  Marriage contracts cannot set parenting terms (address issues regarding custody or access). Judges always have the right to make the custody or access order that they feel is in the “best interest of a child”, regardless of an agreement between the parties. While the Family Law Act specifically allows marriage contracts and cohabitation agreements to address the educational and moral training of children, the Act also says that judges can override the contract if doing so is in “best interest of the child”.

2.  A marriage contract or cohabitation agreement cannot restrict either married spouse’s right to be in a possession of a matrimonial home. On separation, married spouses have an equal right to stay in any matrimonial home, and there can be more than one. Marriage contracts cannot require one spouse to leave a matrimonial home. They also cannot authorize one spouse to sell, mortgage or otherwise encumber or dispose of a matrimonial home before the spouses are divorced or they have a separation agreement or court order addressing the issue. Only married spouses can have matrimonial homes, so this restriction does not apply to cohabitation agreements unless the parties marry with the agreement still in effect. (Note: A cohabitation agreement could create rights to a property that are same as matrimonial home rights for parties who are married.)

3.  A marriage contract cannot opt parties out of the Child Support Guidelines unless the provisions benefit the child as much or more than the Child Support Guidelines. In any event, the court always has the right to make an order that is in accordance with the Child Support Guidelines if the judge does not like the terms of the agreement.

4.  A marriage contract cannot require that the parties go to mediation or arbitration instead of court after separation. The Family Law Act only allows parties to agree to mediation or arbitration after the dispute between them has already arisen. The parties can say that they would like to maintain a good relationship and use a more amicable process than court after they separate, but those terms in the marriage contract are not binding on the parties.

5.  Marriage contracts are not recognized under the Income Tax Act with regard to the treatment of support. Periodic spousal support paid during or after the marriage pursuant to the terms of a marriage contract or cohabitation agreement will not be deductible to the payer and taxable in the hands of the recipient. Unless the parties sign a separation agreement, or obtain a court order, confirming those terms. People who are living together cannot agree that one will pay support to the other to shift the tax burdens to the person who pays tax at the lower rate.

6.  Marriage contracts cannot waive a spouse’s entitlement to receive disclosure before signing the contract or signing a separation agreement. The Family Law Act gives judges the power to set aside any marriage contract, cohabitation agreement, or separation agreement that was negotiated without the parties receiving full financial disclosure.

7.  A marriage contract or a cohabitation agreement also cannot waive a spouse’s right to obtain independent legal advice on either the marriage contract, cohabitation agreement, or a subsequent separation agreement. Again, judges always have the power to set aside an agreement that one or both spouses did not understand. The best evidence that the spouses understood an agreement is for them to have had independent legal advice.

8.  A marriage contract or a cohabitation agreement is also not enforceable in relation to circumstances that the parties did not contemplate at the time that they signed it. If the couple wants their marriage contract or cohabitation agreement to be enforceable no matter what circumstances happen in the future, it is important that the agreement state that they have contemplated all possible future happenings and have still decided that, no matter what happens, they wish to be bound by the marriage contract or a cohabitation agreement. (Ensuring that a marriage contract meets this requirement is one of the trickier aspects of marriage contracts and it is another reason why lawyers need to be involved in the creation of a marriage contract.)

The above are some of the restrictions on the creation of marriage contracts or cohabitation agreements. As long as couples stay away from the above restrictions, they will likely have an agreement that the court will enforce that will give them some certainty with regard to their affairs after marriage breakdown.

 


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