When people think about obtaining legal protection in a relationship, the word “prenup” is usually what comes to mind first. In Canadian law, the equivalent to a prenup is a marriage contract: an agreement made in anticipation of or after marriage which can exempt a couple from and/or modify the legal rights and obligations spouses have to one another upon separation. Whether stemming from our culture or the gravity of marriage itself, considering the legal obligations you have to your romantic partner when marriage is already on the table can be problematic given your legal entanglements can--and often do--begin well before then. This is why it’s often best to work out your intentions and capture them in a cohabitation agreement rather than wait until you’re also planning a wedding to prepare a marriage contract.
Marriage & it’s Built-In Legal Protection in Ontario
Under Ontario’s Family Law Act, married spouses have automatic rights if the relationship ends.
Most notably:
- Married spouses are entitled to equalization of net family property
- Spousal support entitlement can arise automatically (subject to the legal analysis)
- The matrimonial home receives special treatment, regardless of whose name is on title
Because these rights already exist, a marriage contract in Ontario is usually about changing or limiting what the law would otherwise provide. For example, if Sarah and David are getting married, and Sarah owns a successful business she started before marriage, they can agree in the marriage contract to exclude this business from the property equalization calculation (i.e., decide that the increase in value for the business during the marriage will not be divided between them). This would not only save Sarah from having to pay David half of the increase in value for the business accrued during the marriage but also save them both from having to engage in costly negotiations for what is often a complicated and emotionally charged issue.
Common Law Couples Don’t Get the Same Property Rights
In Ontario, common law spouses do not have automatic property division rights, no matter how long they’ve lived together. There is:
- No equalization of net family property
- No automatic right to share in assets
- No presumption of joint ownership
Ownership generally follows legal title (although complex, expensive, and highly uncertain - claims such as unjust enrichment and constructive trust are available in certain circumstances).
In contrast, and of equal surprise to most, the spousal support analysis for common-law couples is very similar to that of married couples.
This is why cohabitation agreements in Ontario are often more impactful than marriage contracts. For example, imagine a situation where Alex and Jordan have lived together in a home that Alex owns for 12 years and, despite Jordan contributing to household expenses and renovations, Jordan has no automatic legal entitlement to equity in the home after separation. This situation becomes even more complicated if they have children together and along with contributing to the expenses and renovation, Jordan has been the primary caregiver. Without a cohabitation agreement, Jordan may face a difficult choice:
- remain in an unhappy relationship,
- leave, and experience a significant change in their standard of living, and/or
- pursue a complex, expensive and uncertain unjust enrichment claim in order to receive an entitlement to the home.
At the same time, Alex faces the stress, expense and unpredictability of defending such claims, all while one of them may also be confronted with a spousal support claim from the other.
What a Cohabitation Agreement Can Do That the Law Doesn’t
A cohabitation agreement allows common law partners to create certainty where Ontario law provides very little.
When entered into out of a place of mutual care for one another, a properly drafted cohabitation agreement can:
- Set out how property will be divided upon separation
- Clarify ownership interests in a home (even if only one person is on title)
- Address spousal support entitlement and amount
- Allocate responsibility for debts
- Provide a road map for any change in entitlements upon marriage
- Reduce the risk of litigation down the road
If separation occurs, or is even contemplated, both parties understand what the separation will look like from a financial perspective. No surprises. No trust claims. No unnecessary court involvement.
Cohabitation Agreements Can Become Marriage Contracts
One other benefit many couples don’t realize:
If you sign a cohabitation agreement and later marry, that agreement automatically becomes a marriage contract, unless it says otherwise. This saves the couple from having these conversations on the eve of a proposal or wedding day and leaves each fully informed and aligned on what their marriage would look like from a financial perspective before making such a big decision.
What About Children?
Whether you are married or common law, domestic contracts cannot override the law on child support or parenting.
Under Ontario law:
- Child support must comply with the Child Support Guidelines
- Parenting decisions must reflect the best interests of the child
Any clause attempting to contract out of these obligations will not be enforceable.
Why Cohabitation Agreements Are Often More Impactful Than Marriage Contracts
Here’s the key takeaways:
- Married couples already have significant legal rights under the Family Law Act
- Common law couples often have none, unless they create them by contract
- A Cohabitation Agreement can transition into a Marriage Contract, thereby providing protections throughout the relationship and clarifying the financial interdependence of the parties involved.
Marriage contracts usually limit or refine existing rights. Cohabitation agreements often create rights that don’t otherwise exist.
From a risk-management perspective, that distinction makes all the difference.
If you are living with a partner or considering such a move, obtaining legal advice before issues arise can prevent costly disputes later. A well-drafted cohabitation agreement can protect both partners and provide clarity at each stage in the relationship.
If you would like to discuss whether a cohabitation agreement or marriage contract is right for you, contact our office to book a consultation with one of our experienced family lawyers.
