September 29, 2023 | By Iffat Ritter
An interspousal contract is a written contract between two people who are, or intend to become, spouses/partners. It is generally used to preemptively settle their affairs in the event of a future separation or, if they did not enter into an agreement prior to separation, then to deal with their issues post separation.
These types of contracts usually deal with typical family law issues such as decision making for children, custody and parent arrangements, child support, spousal maintenance, and property division. An interspousal contract, if prepared and signed properly, can save you the headache and the financial burden associated with litigating these issues upon separation. The cost of litigation, which can be upwards of tens of thousands of dollars, far exceeds the cost of an interspousal contract which is usually in the range of a few thousand dollars.
Prenuptial and Cohabitation agreements are used by people who intend to live together and become spouses/partners, who are living together already as spouses/partners, or who intend on marrying, whether living together yet or not. These are contracts in which the parties set out how their affairs will be dealt with in the event they separate after cohabiting for a period of time, whether or not they become spouses/partners during such period.
Legislative schemes in different provinces set out how property accumulated during a spousal relationship will be divided after separation. In most cases, all property accumulated during the spousal relationship is divided equally between the parties regardless of contribution to the acquisition of the property. This includes the family home, savings, retirement pensions, and personal property. Many people who bring property into a relationship do not wish to share this property equally in the event of separation, so they choose to contract out of the law by entering into an interspousal contract. These contracts allow parties to decide between themselves if or how property will be considered joint and if or how it will be shared upon separation. Many people opt to retain their sole property separately or set up a specific system of sharing property in the event of separation, when such is not contemplated under the legislation in their province.
Without an interspousal contract, if you separate, it is likely that an equal division of the property that has accumulated during the spousal relationship will be divided equally regardless of any contributions by each party.
In most cases of division of a family home, even if one party did not contribute anything to the purchase, maintenance, or payments on the mortgage, the house is still equally divided. If you bring property into the relationship, you can claim an exemption from the division of this property, but this does not necessarily mean the court will allow the exemption. The best way to protect your property from an equal division, and ensure the property is dealt with in the way you see fit, is by entering into an interspousal contract.
It is best to have an interspousal contract prior to moving in with your partner. In most jurisdictions, persons who cohabit or who fall under the definition of an interdependent adult can bring a claim against your property upon separation even if you have not cohabited as spouses for a period of 2 years. Rather than bringing these claims under family property legislation they bring these claims under civil litigation principles of equity including unjust enrichment or they claim there was a constructive trust. This is where a claim is brought for non-monetary contributions. For example, if your partner comes to live with you on the farm and assists you with farming duties and you then separate before you qualify as being spouses, they can claim a division of property on the basis of their contributions to the farming operation.
The safe bet to protect your property from an undesirable division is to have an agreement in place before your partner moves in with you, or before you marry. In order for these types of agreement to be upheld by the court they must be done formally with strict attention paid to the statutory requirements for these types of contracts in the province. For example;
- Each party must have capacity to make decisions for themselves;
- They must be signed of your own free will;
- There can be no coercion or duress to sign;
- The parties must be aware of what property there is that could become divisible if no contract is signed;
- The parties must understand what rights and entitlements they have and what they are giving up by signing the agreement;
- The parties must each receive independent legal advice; and
- The contract must have attached to it a certificate of independent legal advice.
The best way to ensure these objectives are met, and to ensure your agreement is binding, is to reach out to qualified and experienced counsel.
Iffat Ritter is Senior Counsel at Procido LLP and is happy to discuss and advise on such agreements.
This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice. Contact Procido LLP (www.procido.com) if you require legal advice on the topic discussed in this article.