Is a Prenuptial, Postnuptial or Cohabitation Agreement Right for You?
Planning for a marriage or a long-term relationship involves making financial choices that impact your future together. No one enters into a marriage or long-term relationship with the intention of separation, but unforeseen circumstances can arise. Preparing a legally binding agreement in advance can be a proactive and effective way to protect individual assets, clarify financial responsibilities, and potentially save considerable costs by preventing future legal disputes.
In Alberta, there are few types of agreements that could be utilized, depending on the nature of your relationship:
- Prenuptial agreement: This is a legally binding agreement that parties can enter into prior to getting married that outlines and explains what would occur if the marriage ended in divorce. This is commonly referred to as a “prenup”.
- Postnuptial agreement: In some cases, the parties have not signed a prenuptial agreement prior to the wedding. There is still the opportunity to create a legally binding agreement outlining what would occur upon marriage breakdown. A postnuptial agreement functions in the same way as a prenuptial agreement but is signed during the marriage. This is also referred to as a “postnup agreement.”
- Cohabitation agreement: Similarly to a prenuptial agreement, this agreement outlines and explains what would occur if the relationship were to end. The difference is that a cohabitation agreement is for parties that aren’t married. If the parties were to become married in the future this agreement could be converted into a prenuptial agreement. It is also referred to as a “cohab agreement”.
Far from being just a legal formality, a prenuptial/postnuptial/cohabitation agreement can offer both partners peace of mind, reassurance, and clarity.
If you’re wondering how an agreement could benefit you, here are several factors to consider.
1. Protecting Individual Assets
An agreement can establish how personal assets, such as real estate, savings, investments, or a business, would be treated if the relationship were to end. This means each partner has a clear understanding of who owns what, especially for assets acquired before the relationship began. This can be particularly important for those with family-owned businesses, real estate, or significant investments that they would like to keep separate from marital assets.
2. Setting a Clear Date of Cohabitation
The date of cohabitation is often important for defining and determining asset division in the event of separation. By setting this date in an agreement, you can establish a concrete timeline. This clarity can prevent potential disputes in the future and provide both partners with a clear understanding of when the relationship began.
3. Exemptions for Specific Assets
Alberta law allows for certain assets to be considered exempt from property division during divorce or separation. An agreement can explicitly mention any exemptions you or your partner wish to designate, such as inheritances, family heirlooms, or investments. Defining any exemptions can help ensure that these personal or family items won’t be subject to division.
4. Reducing Future Litigation Costs and Stress
In Alberta, property division and divorce can be a lengthy and stressful process, especially if both parties cannot reach an agreement. If separation does occur, having a detailed, legally binding agreement in place simplifies the division of assets which in turn reduces the need for lengthy and costly litigation. By addressing issues up front, you not only save on legal fees but also spare yourself and your partner from the emotional toll that complex legal battles can bring.
5. Spousal Support Obligations
An agreement can allow couples to outline specific terms for spousal support, including the amount and duration, should the relationship end. By agreeing on these terms in advance, both partners can avoid uncertainty and potential disputes. This proactive approach can provide a sense of security, knowing that each partner’s financial well-being has been considered fairly and transparently.
Clearing Up Common Misconceptions About Agreements
Some believe that a preparing an agreement signals a lack of trust or commitment. In reality, it’s about being proactive and realistic. Financial transparency and clear expectations about asset division can strengthen the relationship by ensuring that both partners are on the same page.
Why Prenup/Postnup/Cohab Agreements Are Important in Alberta
Alberta’s laws, including the Family Property Act, define how assets are divided in marriage or common-law relationships. With a prenup/postnup/cohab agreement, you have more control over how your assets are managed and divided, rather than leaving these decisions solely to Alberta’s courts. Including details such as the cohabitation date and specific asset exemptions further enhances this protection and helps to ensure that your unique financial interests are upheld.
How a Lawyer Can Help You Create a Strong Agreement
Drafting an agreement requires a thorough understanding of Alberta’s family laws. A knowledgeable family lawyer can ensure your agreement is fair, compliant with provincial regulations, and tailored to reflect your specific needs. At Vogel LLP our family lawyers, including Michelle Brandt and Aida Rafie who have extensive experience in this area, regularly assist with these agreements and are here to guide you through each step.
If you’re considering a prenup/postnup/cohab agreement or want to learn more about the process, contact us at Vogel LLP. We’re here to support you as you build your future together with confidence and peace of mind.