A domestic contract is a written agreement between you and your spouse/former spouse that sets out the rights and obligations of you and your spouse/former spouse. Under the Ontario Family Law Act, domestic contracts include:
• Marriage Contracts,
• Cohabitation Agreements
• Separation Agreements, and
• Family Arbitration Agreements.
MARRIAGE CONTRACTS
What is a marriage contract?
A marriage contract is a legal document that you sign voluntarily. It defines your matrimonial regime and each spouse’s contribution to the household expenses. It’s a document that governs how the couple’s finances are managed and how property excluded from the family patrimony is distributed in the event of divorce or death.
It applies only to married people. Common-law spouses may enter into a similar agreement, but it’s called a “cohabitation agreement.”
The purpose of a marriage contract is to define how assets will be divided in the event of divorce. Throughout their marriage, a couple accumulates property and assets that make up what is called the family property or matrimonial property. It includes family residences, furniture and vehicles. Money in retirement plans accumulated during the marriage (such as an RRSP or pension fund) is also considered part of the family property.
In the event of divorce, the law provides for the division of the value of that property. Even a marriage contract cannot change the distribution. However, certain assets are excluded, such as company shares, certain investments, TFSAs, assets acquired before marriage, gifts and inheritances. A marriage contract can specify whether and how these items are to be divided.
The main advantage of a marriage contract is that it allows spouses to choose the separation as to property regime or create their own matrimonial regime in the event of a breakup.
This makes for a clear agreement. It’s easier to talk about a possible separation when everything is going well, as communication tends to break down at the time of a divorce.
The Marriage Contract outlines the financial obligations of both Parties and includes a plan of how to divide assets and debt obligations if the marriage ever comes to an end.
Marriage Contracts are often associated with individuals who have a large number of assets.
However, a Marriage Contract can be used in many different situations, such as the following:
• One or both of the Parties have children from a previous relationship
• One or both of the Parties own property that they would like to keep separate
• One or both of the Parties have a significant amount of debt
• The Parties would like to outline their financial responsibilities for housing and living expenses prior to moving in together or after getting married
If a couple does not have a Marriage Contract in place when they divorce, provincial or territorial laws and courts are left to decide how to divide property, dictate support, and allocate debt. By creating a Marriage Contract, the terms the Parties agreed to are used instead of the default guidance of provincial or territorial law. A Marriage Contract, like any contract, can be challenged in court, but a Marriage Contract creates the initial presumption that the Parties agreed to its contents and want to follow those guidelines they agreed on. A thorough and successful Marriage Contract can drastically speed up divorce litigation, or even avoid it altogether in the event of a divorce.
In order to complete a Marriage Contract, the Parties should work together to disclose their assets to each other, decide how they would like to outline their financial obligations, and make arrangements should the marriage end. A Marriage Contract covers several major areas as follows:
1. Assets and Debts: This Agreement allows the Parties to describe any assets or debts that they are bringing to the marriage. Failure of either Party to disclose all assets and financial information to the other Party may result in the invalidity of the Agreement so it is important that both parties disclose all assets and financial information. All of this information should be written down separately to the Agreement and attached to the Agreement as either Schedule A or B, depending on the party.
2. Property: The Parties can specify what, if anything, will be considered shared property subject to division. For example, couples often decide that the property they acquired separately before the marriage should remain separate property not subject to division after the marriage. This consideration is especially important if either of the Parties has inherited property or has a great deal of assets.
3. Matrimonial Home: If the Parties plan to own a house or are planning to purchase a house together after the marriage, this section of the Agreement allows them to outline matters related to the matrimonial home, such as payment of expenses related to maintenance of the marital residence, and responsibility for shared living expenses. There are many different ways for a couple to manage their finances together, whether they maintain separate bank accounts and each take on different bills or if they have a joint bank account that they both contribute to.
4. Children: If one or both of the Parties has children from a prior relationship, they can specify this. This portion of the agreement allows the Parties to dictate whether they plan to provide a home and reasonable support for each others children from a prior relationship without creating an obligation to continue that support should the marriage end. This section also allows the Parties to list any children they have had together.
5. Spousal Support: This Agreement allows the Parties to outline whether or not one Party will pay spousal support to the other Party if they divorce in the future. Spousal support is generally paid to the Party who made less money during the marriage. If the Parties already know that one of them will not be working or will be making significantly less money, spousal support payments can be negotiated and planned ahead of time using the Marriage Agreement.
A Marriage Contract can be ruled invalid in the following situations that the Parties should be careful to avoid:
• Failure of either Party to disclose all assets and financial information to the other Party
• Evidence of fraud
• Evidence of duress or unfairness
• Signed involuntarily
The Parties should make every effort to complete the Agreement well in advance of the marriage; thirty days is a common guideline. Further, they should both have a reasonable amount of time to review the completed Agreement prior to signing. After completing the Agreement, the Parties may independently obtain legal advice. It is recommended that you obtain a lawyer to assist you in drafting the agreement. If you and your spouse prepared your own homemade agreement, or if the agreement was drafted by your spouse’s lawyer, you should consult with a lawyer prior to executing the document due to the nature of the important and personal rights involved.
The Parties do not need to file their Agreement anywhere once it is completed. However, signed copies of the document should be kept in a safe and secure location such as a safe, bank safety deposit box, or with a lawyer.
If circumstances change, such as one of the Parties loses their job and can no longer fulfill the financial obligations as detailed in the Marriage Contract, or the Parties decide they want to make new arrangements, they do not need to write an entirely new document. By using an Amendment to an Agreement document, the Parties can easily add, delete, or rewrite portions of the Agreement as desired or necessary.
When should you sign a marriage contract?
You can sign a marriage contract at any time.
However, if a marriage contract is signed before the ceremony, it takes effect on the day of the ceremony. If it is signed after, it takes effect on the date it is signed.
You should consult with a lawyer to negotiate the best possible agreement on your behalf. It is highly recommended that you attach a list of your assets and specify what will not be shared.
A marriage contract can be amended, or a new one can be signed. The people involved must obviously be present and in agreement.
• The most common matrimonial regime is separation as to property.
You may even be able to tailor your marriage regime under a marriage contract if you wish. The only condition is that it must comply with the law.
COHABITATION AGREEMENTS
What is a cohabitation agreement?
It’s a legal document that you prepare as a couple. Some jurisdictions require it to be drawn up by a lawyer or with a lawyer’s assistance, but even if it isn’t mandatory in your jurisdiction, seeking legal counsel is highly recommended. The document allows you to put certain agreements down on paper, such as the payment of household expenses or what would happen in the event of a separation. It also allows you to agree on:
• Shared responsibilities for your child(ren);
• The property and debts each person has when you start living together;
• How shared property will be divided in the event of a separation;
• The terms of repayment for shared debts in the event of a separation;
• The payment of spousal support in the event of a separation;
• The terms of review of the agreement in the event of a major life change for one of the partners after separation.
Cohabitation agreements work the same way, whether you’re a same-sex or opposite-sex couple. They can include anything you consider necessary to your relationship and can make it easier to manage the unexpected.
A cohabitation agreement changes how the law applies to your situation if you separate, so it’s important to get legal advice before you sign one. You’ll probably be giving up some rights.
You can make a cohabitation agreement:
• before or while you’re cohabiting (living together in a marriage-like relationship), or
• before or during your marriage.
What can be in the cohabitation agreement?
A cohabitation agreement can cover:
• How to divide family property, like real estate, possessions, and pensions.
• How to divide any debts.
• Whether one spouse should receive spousal support.
• What to do if you can’t agree (for example, will you use mediation?).
What can’t be in the cohabitation agreement?
The agreement you make before or after you start living together can’t deal with parenting issues (for example, parenting time and parental responsibilities) and child support after you separate.
You can write about those things in the agreement, but the court won’t enforce them if you break up. The only exception is if you make your agreement because you’ve decided to separate but you’re still living together in one house.
You should also know that for a cohabitation agreement to be valid, both spouses must agree to it. In addition, you must:
• Be of age and have the legal capacity to consent
• Consent freely with full knowledge of the facts
What if you don’t have a cohabitation agreement?
You can still make an agreement after you break up. This is called a separation agreement. It’s a bit more complicated than making a cohabitation agreement but a lawyer can help you.
At Metelsky Law, we are intent on helping people plan in advance so they can avoid problems before they arise. It is easier to avoid the messy legal issues that arise if you separate or pass away by planning in advance than to try and fix them after they have occurred.
Our main goals are:
(1) to make sure that people in or about to be in a common law relationship understand what their legal rights and obligations are; and
(2) to help them protect their assets, income, and children.
Once you understand your legal rights and obligations, we can draft a cohabitation agreement that will protect you.
A Lawyer at Metelsky Law will help you write the agreement for a fee you can afford. Many lawyers charge a set fee for writing agreements like this. In short, if you feel the need for a cohabitation agreement, don’t hesitate to ask for help with the process. Our specialists can provide you with the information you need.
SEPARATION AGREEMENTS
If you and your partner mostly agree on what you want to happen when you separate, you can put what you’ve agreed on in a separation agreement. A separation agreement is a written contract that you and your partner make that says how you will deal with your issues.
You can make a separation agreement if you’re married or in a common-law relationship.
If you’re married, you don’t get a divorce by making a separation agreement. You have to apply to the court to get a divorce. But, you can agree on when and how to get a divorce in your separation agreement.
You don’t need a lawyer to make a separation agreement. But it’s a good idea to get your own legal advice before signing one. For example, a lawyer can help you understand your rights and responsibilities toward your children and your partner, and the rules your agreement has to follow to make it legal.
When making a Separation Agreement, it’s important that:
• you both understand the agreement
• the agreement is fair
• you share complete and honest financial information
You must also consider these issues:
Children
- Do you have financially dependent children?
- Who has the main responsibility for deciding matters of health, education and welfare?
- Who has custody?
- Who will the child mainly live with?
- What’s the visitation and vacation schedules?
- Who is paying child support? How much? How often?
- Are there any special expenses such as daycare costs?
Property
- What are you doing with the home?
- Do you or your ex get any specific items?
- What happens to shared debts and assets?
- What happens to your pension and life insurance?
Support
- Is one person paying spousal support?
- How much spousal support will be paid and how often?
- When will the payments stop?
- What are the tax implications?
You do not need a separation agreement to be legally separated or to Divorce in Ontario. There is no law in Canada compelling couples to enter into a separation agreement. However, a separation agreement offers both parties a degree of control over what will be received by each party when you separate. It offers both parties the opportunity to spell out the decisions in writing so that there are no misunderstandings about what has been decided.
If you have children, your divorce may not proceed without the issue of child support being resolved. The Divorce Judge needs to know if there are adequate arrangements for child support before granting a Divorce Order.
Therefore, if you have children, then it is strongly recommended to have a separation agreement before you file for divorce in Ontario.
When to make a separation agreement
You can make a separation agreement at any time after you separate. But there are time limits to ask your partner for some things, like dividing property. For example, you have six years from the date of separation but only two years from the date of your divorce to divide property.
You don’t have to wait until you and your partner agree on everything before making a separation agreement. You can make a separation agreement on the things you agree on, while you continue to work on resolving your other issues. For example, if you agree on decision-making responsibility, parenting time, and child support, you can make an agreement dealing with those things, while you continue to work on your property issues. Decision-making responsibility and parenting time used to be called custody and access.
You can also make a separation agreement that lasts for a certain period of time. For example, if you agree on where your children will live just for the summer, you can say the agreement ends in September.
You can also change a separation agreement at any time by making a new one, if you and your partner agree to the changes.
Why have a separation agreement
There are many reasons to make a separation agreement. An agreement:
• can be faster, cheaper, and less stressful than going to court
• lets you and your partner decide what works best for you and your family, instead of letting the court decide
• lets others involved in your children’s care, such as their school, daycare, and doctor, know what has been agreed on
• makes it easier to prove what you and your partner agreed on than with a verbal agreement
• can be used to get help from the Family Responsibility Office if there is a problem getting child support or spousal support
There are situations in which making a separation agreement may not be the best thing to do. For example, in situations where:
• you’re afraid of your partner because of a history of partner abuse
• there are serious mental health or drug abuse issues
• you can’t talk to your partner even with help
• you can’t work together with your partner even with help
In those situations, you may need a family law professional like a lawyer or a mediator to help resolve your issues. Or, you may need to get a court order that you can enforce. This means that the court can order you or your partner to do what the court order says.
How do you make a separation agreement legally binding?
In Ontario, for the agreement to be legally binding, it must be in writing, signed by both parties, and witnessed. Though it is not mandatory to have a separation agreement, it often helps in providing clarity and minimizing disputes.
FAMILY ARBITRATION AGREEMENTS
Arbitration is one kind of family dispute resolution (FDR). FDR is a way for people to try to work out legal issues without going to court. You and your former partner must try to settle your family law issues through FDR, unless it would not be appropriate to do so.
In arbitration, you and your former partner hire a third person to resolve your conflict. This person is called an arbitrator. An arbitrator cannot grant a divorce or an annulment but can decide on decision-making responsibility of children, support, parenting time, and how to divide property. They can only decide on the issues you ask them to resolve. The arbitrator must use only Canadian or Ontario family law.
Arbitration is like a court case, but it is less formal. Most people have a lawyer. At the hearing, both you and your former partner can give evidence, and undergo cross-examination of your evidence, and say what you think is fair. After each of you has talked, the arbitrator will make a decision. Their decision is called an arbitral award.
If you do not know your rights under Canadian laws, talk to a lawyer before agreeing to arbitration. Once arbitration starts, you cannot decide to walk away. You must obey the arbitrator’s decision even if you do not agree with it. As long as the arbitral award follows Canadian laws, it is legally binding.
Arbitration can be expensive because you should have a lawyer. You may also have to pay the arbitrator. Even if you do not have a lawyer with you at the hearing, you must prove that you got legal advice before agreeing to arbitrate. The cost will depend on how much the arbitrator and lawyer charge. Legal Aid will not pay for family law arbitration.
ARBITRATION VERSUS MEDIATION?
People often think arbitration is the same as mediation. It is not. Mediation is another form of FDR. In mediation, a trained mediator helps people come to an agreement. If you are in mediation, you have choices. You can end the talks at any time or decide not to accept what your spouse is offering or the mediator is suggesting. In arbitration, you have no choice. You must accept the arbitrator’s decision, as long as it follows the law. You can appeal a family arbitration award to the court in some circumstances
ARBITRATION VERSUS PRIVATE AGREEMENT?
Sometimes, women are pressured into asking someone they respect, like a doctor or religious leader, to make a decision about a family law dispute. If the person is not an arbitrator, their decision is not legally binding and cannot be enforced.
If you are worried that the person making decisions about your case is not a real arbitrator, ask to see proof that they are qualified to do this work. In Ontario, arbitrators who are not lawyers must have some training in family law. Also, all arbitrators must have training in how to recognize the signs of domestic violence and power imbalances.
HOW ARE ARBITRAL AWARDS ENFORCED?
After arbitration, you can bring an application to the family court to enforce the award. Once the application is filed, the court can decide to enforce the arbitration award as if it were a court order if it meets certain conditions.
ADVANTAGES AND DISADVANTAGES
Arbitration is good because:
• it is more efficient, less formal, and less expensive than going to court;
• the process is flexible;
• you and your former partner can choose who will arbitrate your dispute.
However, arbitration may not work well for those who cannot afford a lawyer. If you do not have a lawyer, you may not know all of your rights and you may not know how to convince the arbitrator of your case.
Your rights under the Arbitration Act and the Family Law Act:
• A private decision made by someone who is not a family law arbitrator is not legally binding and cannot be enforced.
• In family law arbitration, the Family Law Act is more important than the Arbitration Act. Courts must use family law principles.
• All family law arbitrations must follow Canadian or Ontario law or they are not legal. For example, arbitrators cannot rule that your husband can take more than half of the value of a family’s property because Canadian laws say that each spouse should get half of the value of the property when a couple gets a divorce.
• All arbitration awards are “domestic contracts”. Courts should treat arbitral awards the same way they handle all domestic contracts.
• All family law arbitral awards must be in writing.
• Any arbitral award about children must follow the “best interests of the child” test. Arbitrators must consider the same things that family law courts consider when they decide what is in the child’s best interest.
• You always have the right to ask the court for permission to appeal an arbitral award. You cannot give up that right. If you challenge the award, the court can substitute its own decision for the arbitral award. The court may do this if the arbitral award says anything not related to family law or if it orders something that the court would not have ordered. Courts will also check that arbitral awards about decision-making responsibility and parenting time follow the Children’s Law Reform Act. The court will only enforce orders that are in the best interests of the children.
• Starting in April 2008, all family law arbitrators who are not lawyers must take training in Canadian family law. All arbitrators must take training to learn about domestic violence and power imbalances.
• Arbitrators must make sure that the process will be fair. To do this, they must investigate whether there has ever been violence or abuse in your relationship. They must also check that you and your former spouse have equal power and control in your relationship. Although arbitrators have the power to set up ways to protect you in these circumstances, most people agree that arbitration does not work well if your spouse was violent or abusive, if he has tried to bully or scare you, or if he has taken advantage of you.
• Before you start arbitration, you must sign a form that says you got independent legal advice. The lawyer who gave the advice must also sign the form.
• Arbitrators must receive the training approved by the Attorney General. Arbitrators must also keep records of all arbitrations for at least 10 years.