Do you need a pre-nup?
Second marriages can be very different from first marriages. Couples may feel “older but wiser” and be sure that this time, they’ve gotten it right – and won’t be headed for divorce court. And to some extent, they’re right – Canadian statistics suggest when both members of a couple are over 40 and entering a second marriage, they face only half as great a risk of marital dissolution as those who were under 30.
Even so, that rate may be as high as 27 per cent, or one quarter of all second marriages. And since older couples tend to have accumulated more personal assets before they come into a marriage – divorce settlements, home equity, investment savings and earnings, and inheritances, for example – they may have more to loose if the marriage dissolves.
So even if you’re sure that you’ve finally found the right partner, you should consider how best to protect yourself financially. In Canada there is no question that a prenuptial agreement can be one of the best ways to ensure that assets acquired prior to the marriage will remain in your hands. Here’s what to consider.
When do you need a pre-nuptial agreement?
You should definitely consider a prenuptial agreement if:
• Your net worth exceeds your fiancé’s
• Trusts, real estate or stocks you accumulate before marriage are worth a significant amount
• You own, or are a partner in a business
• There are children from a previous marriage and you want some assets to be earmarked for them
• Your career is expected to take off.
• You have inherited family property (cottage, home, jewelry) that you would want to keep in the family
Broaching the subject
The best time to introduce the idea of a pre-nuptial agreement may well be as soon as the relationship is serious – and before a proposal. Although there won’t be any need at that time to get into specifics, it’s better to find out early if that kind of contract might end up being a deal-breaker.
It may not seem romantic, but a marriage is not just about the merger of two hearts but the bringing together of a lot of property. If your partner isn’t willing to at least entertain the idea of you protecting your own assets, he or she may not be the right partner.
The last thing you want to do is spring it on your spouse-to-be in the middle of wedding preparations. Not only are tensions higher at that time, but there may be significant pressure on one of the parties to agree to something with which they aren’t actually comfortable.
Preparing a prenuptial agreement can also take up to six months, so be sure to plan for that timeframe if you are moving in that direction.
The first step is to sit down with your partner-to-be and discuss the details, writing as much as possible down. The more that you can settle between yourselves in advance, the less money and time will be spent in the lawyer’s office. One key component to ensuring that a prenuptial agreement will be binding is honesty – if one partner fails to disclose assets during the process, this can invalidate the contract.
When discussing details try to remain calm and remember that money does not equal love. If one partner wants to reserve assets for his or her children from a previous marriage, it does not mean that he or she will be a lousy stepparent to the other partner’s children. At the same time, it’s always a bad idea to agree to anything that you find upsetting or distasteful – that is the kind of issue you don’t want to bring into a new marriage.
One possibility to discuss is the concept of a “sunset clause” – a statement that the prenuptial agreement is invalid after a certain number of years of marriage. This can be one way to move towards combining assets more fully while recognizing that there’s still a period of time when you need them to be protected – while your children are still young, for example.
Next, each of you must hire your own independent lawyer. If one of you does not have his or her own lawyer, the contract may be invalidated. Then the lawyers can review your agreement to be sure that it is legal in your province, and to ensure that each of you is being taken care of appropriately.
Once everyone agrees on the details, the contract should be signed and witnessed, and each of you should get a copy – you may also want to provide copies to other professionals, such as an accountant. After that, there’s nothing more to do than plan the wedding itself!