ASK THE MONEY LADY: Should I skip the pre-nup to save on legal fees?

Thanks.

Helen M.

Hello Helen,

This is a question I get often.

Seems like people know it’s a good idea to have a pre-nup or cohabitation agreement but they don’t want to spend the money to get one. Why not?

If you have assets — a car, house, cottage, and more — why would you risk all that you’ve worked for by not having a written understanding? Even if it costs you a couple of thousand dollars, isn’t that money well spent?

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• Dec 31, 1969
• Comments

• Dec 31, 1969
• Comments

Let’s start with the easiest domestic contract, and the least expensive: a cohabitation agreement.

Cohabitating partners have very few rights to property, when compared to married couples. Typically, the property you bring into the relationship, plus any increase in its value, usually continues to belong to you. This would include investment assets, registered accounts, real estate or chattels.

The main reason for drawing up a cohabitation agreement is to provide for a division of property if the relationship breaks down. The most straightforward way is to state that all property remains the separate property of each individual. In the contract, provide for a “separation of property regime.” This means that all property, including the assets that are owned before cohabitation, plus any increases in value, and all property acquired during the relationship is owned strictly according to title.

This type of domestic agreement is very different from a marriage contract and not usually ideal for partners long term. That being said, cohabitation agreements are not as rigid as marriage prenuptial agreements, they are less costly, and contracts can be crafted with a lot more freedom or creativity based on the particular conditions and circumstances that each party is in when they begin their union and plan a life together.

If you don’t have a lot of assets and you’re planning on just living together and not getting married, a cohabitation agreement is a good, less expensive option.

Now, let’s talk about pre-nups.

This is a contract you typically enter into prior to marriage. However, they can also be signed or amended at any time during the marriage.

I have always recommend older couples who bring any assets to the marriage to consider a pre-nuptial agreement. They are extremely beneficial for comprehensive estate planning, which always must include death succession, not just the possibility of a divorce.

To protect each other, you want your lawyer to be interested in what will happen in the event of one of you dies and you must have the new marriage contract and your new will “in sync.” The reason I say this, is because marriage contracts can, and often do, override existing wills.

Marriage contracts can be limited in their scope. To be valid and enforceable, the spouses must have made full and complete disclosure of all their assets and the current values, including debts and liabilities. You also want independent legal advice so that the marriage contract is less vulnerable and can’t be challenged by family members after a death and set aside by the courts.

Remember, this agreement reflects a mutual understanding, is drafted with the help of your lawyer and signed well in advance of your wedding date.

Good luck and best wishes,

Money Lady