Marriage Contracts

 

A Marriage Contract is for spouses who wish to enter into a domestic contract before or while they are married. The primary purpose of the Contract is to preserve one spouse’s ownership of property acquired prior to or anticipated during the marriage.  The Contract may also provide for future support obligations, and if there are children or the spouses intend to have  family, the “right to direct the education and moral training” but not the delegation of decision making for specific milestones of the children’s lives (education or religion) or a parenting arrangement of their children.

A Marriage Contract may direct that the sharing of certain classes of property be dependent upon the duration of the marriage, upon the happening of a certain event, or if an event does not occur.  For example, within months of separation, for every year of marriage a fixed percentage of the accumulated wealth of one spouse will be transferred to the other. If the marriage succeeds for more than ten years, the fixed percentage to be shared may reach a maximum of 50 percent.

Another example of a reason for spouses to enter into a Marriage Contract is to specify the parameters of the spouse’s entitlement to obtain a share ownership or a position in the business. Often a family enterprise will require that a spouse waive all such entitlement prior to and during any period of cohabitation whether in marriage or not.

A third example of the use of a Marriage Contract may prescribe how certain gifts may be used between spouses where ownership of the asset doesn’t transfer to the recipient of the gift. A new car, for example, could remain in the ownership of the purchaser but be used exclusively by the other spouse. In the event of separation, the car would be returned to the owner spouse and the recipient would waive all right to an interest in ownership.

Properly identifying and excluding the value of property from division should be carefully negotiated with the other spouse. The property could include land, investments, intellectual property, and inheritances, wherever they may be located or held. They may also relate to beneficial interests such as trusts or realty.

The exclusion from sharing in any value of the property may also include all or portions of income derived from the asset and any subsequent acquisition derived from the proceeds of the sale of the initial property.

Domestic Contract

“Domestic contract” is the umbrella term for classes of family agreements entered into by spouses or family partners. The content must satisfy certain requirements to be enforceable, such as being in writing, signed by each party before a witness, and dated. The class of domestic contracts includes:

Enforcement of a domestic contract is commenced by the filing of the contract in the proper court with affidavit evidence that the agreement has not been varied and remains in force at the date of filing.

Negotiated without Duress

The terms of the Marriage Contract must be negotiated in good faith and in a timely manner. A voluntary willingness by both spouses to enter into the contract must be evident. Any coercion, threats, or feelings of duress by a spouse prior to or during the negotiations of the terms of the proposed contract should be investigated by the client’s lawyer.

This is particularly critical if a Marriage Contract is suddenly imposed upon an unsuspecting partner just weeks prior to the wedding. Given the heavy schedule and the onerous number of tasks demanding each partner’s attention as the wedding approaches, care must be taken to ensure that proper due diligence and financial disclosure have been achieved, and that independent legal advice has been obtained. Even if care has been taken, a spouse’s later claim that the contract was unconscionable and ought to be set aside brings unwelcome scrutiny and possible unanticipated consequences.

Exchange of Full Financial Disclosure

The process of providing financial disclosure is necessary for the full consideration of requests by one spouse to approach prospective property division and future financial support in a manner different from what is provided by family law statute. Each of these issues demand different kinds of documentary disclosure, calculations, and may require different designated valuators. Knowing the scope of possible asset value informs a non-owning spouse of the potential economic impact of waiving an interest in the asset should the parties separate.  How assets are used, who contributes to the acquisition of wealth, what non-financial contributions are made to sustain the lifestyle of the spouses and other circumstances need to be considered today to develop a durable contract for the future.

It is the responsibility of each client to meet the disclosure requirement. This is the case whether or not they may eventually decide to waive any entitlement to receive a share of the other’s property or to receive spousal support.

There must be comprehensive financial disclosure exchanged between the clients at the time the Marriage Contract is contemplated and negotiated. The ‘full and frank” sworn financial statement and all related supporting documentation are exchanged between the clients through their respective lawyers. Requests to provide proper values of all assets, debts and liabilities must be answered to the satisfaction of the client making the request.

Marriage Contract’s Transitional Nature

A Marriage Contract by its very nature a Separation Agreement setting out the terms for how property will be shared if the relationship breaks down. Clients can continue to rely on the arrangement they struck when the Marriage Contract was entered into without having to renegotiate matters if a breakdown of the marriage happens.

That is not to say that clients should presume what was negotiated years ago is relevant. It is prudent to review the terms of the Marriage Contract on a regular basis independently with a family law lawyer to ensure the agreement continues to provide what each client needs and wishes. It will also ensure that any changes in the law which benefit the client are incorporated into an amending agreement.

Provisions Relating to Children

The best interests of the children of a relationship must always be paramount. Provisions in a Marriage Contract stipulating requirements for custody (decision making) or parental access to any of the children of the relationship will be unenforceable. Custody and access decisions by their very nature need to be responsive to and immediately relate to the welfare of children.

Similarly, the child support is a legal and moral right of each child until they become financially independent.  Provisions of a domestic agreement must be in accord with the Child Support Guidelines in nature and in practice.