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Gramma Might Need a Prenup Too

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This article considers the not uncommon situation where a senior falls in love with another senior and decides to marry. Both spouses have accumulated assets and have children. One or both may have divorced a spouse and have children and stepchildren. Both have families with financial expectations in relation to the property accumulated during the lifetime of their parents, and one or both prospective spouses may have interests in a family business. To complicate matters, both prospective spouses know that they will be responsible for the expenses of caring for the other spouse as their physical needs increase: assisted living, nursing homes, medications and assistive devices and therapies. Both spouses know that these expenses will come sooner than later. How can the prospective spouses ensure that their financial affairs will be predictable and not disrupt the family?

A prenuptial agreement (marriage contract) can help alleviate many family concerns by having each of the parties waive all rights to inherit a spouse’s property. In addition, the parties can waive any obligation to split assets in the event of divorce, and they can waive the right to spousal support. The agreement can also detail who will be responsible for paying what costs — such as assisted living or nursing home fees.

The spouses would be prudent to review their wills and estate planning instruments to ensure that everything has been properly disclosed to the other spouse, and to ensure that the marriage contract, wills, estate planning instruments etc. are consistent with the parties’ wishes.

Read the article here.

Take away:

  • Planning is necessary at any age when entering into a cohabitation or marriage agreement. It is even more important for older couples who have accumulated more assets, have more children with expectations, may have interests in family businesses, and who are facing significant increases in (health) care costs in the not so distant future.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Is a Waiver a Good Strategy to Protect a Family Business from Marital Breakup?

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If a spouse operates or owns a family business, one strategy to protect that business would be to enter into a marriage contract that contains a waiver by the non-owner spouse of the owner spouse’s interest in the business, whether the business was owned prior to marriage, or whether it is anticipated that one spouse will take over the family business in the future. The contract can also include a waiver of any claim for the future increase in value of the business over the course of the marriage.

Two important considerations involved in drafting a waiver include: (a) the business owner must provide full financial disclosure to the non-owner spouse regarding the business’ present value and its future value if known, and (b) each party must receive independent legal advice. The financial disclosure needs to include the current value of the business, and any future value (if known). It may be necessary to consult a business valuator, depending on the size of the business.

Read the article here.

Take away:

  • To ensure that there has been a full disclosure of the value of a business interest at the time of the signing of a waiver in a marriage contract, it may be prudent to consult a business valuator.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Marriage Contracts and Child Support

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Parties to a marriage contract cannot waive their obligations to provide support for their own children. However, if your spouse has brought children from a previous relationship into the marriage, you may wish to consider a provision in your marriage contract (assuming you have one – and this may provide an incentive to enter into one) that specifies that “under no circumstances will you stand in place of a parent to these children and will not be required to pay child support to them in the event of the breakdown of your marriage. ” The reason for this is that you don’t have to be a biological parent in order to be required to pay child support. As long as you have treated the children as your own (or stood in place of a parent), you may end up being required to support them.

As with all marriage contracts, the parties must receive independent legal advice. It is very important that each spouse receive this advice in a language which they can understand and which permits them to both receive a full explanation of the effects of the terms of the agreement, and to ask questions about the agreement.

This is especially important if any rights or obligations are waived in the agreement.

Read the article here.

 

Take away:

  • While parties cannot contract out of the responsibility to support their own children, they can agree on support obligations for children brought into the marriage from a previous relationship.
  • Both parties should receive independent legal advice, in a language that allows them to appreciate the meaning of the terms of the contract.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Was the Marriage Contract Signed under Duress?

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The article discusses the high profile case of McCain v. McCain (currently on appeal to the ONCA). After 15 years of marriage, the spouses entered into a marriage contract under which the wife waived her equalization and support rights. The husband’s father was prepared to disinherit him if the agreement was not signed. After 30 years of marriage and 5 children the couple separated. The wife was left with a $7 million settlement, and all property in her name – a house and 2 cottages which were all heavily mortgaged (by the husband). The husband was worth $500 million at the time of separation.

Waivers of any rights in a marriage contract may be considered unenforceable by a court under the Ontario Family Law Act if (1) one spouse did not provide full and proper financial disclosure to the other regarding assets, income and debts (including their values); (2) one spouse did not understand the nature or consequences of the contract (e.g., each spouse should have proper independent legal advice prior to signing); or (3) the contract or the making of it somehow offends contract law rules (such as the presence of fraud, duress, undue influence or unconscionability) .

In an interim order, the Court found that the contract was entered into under duress, and posed the question: “How could [she] have possibly refused to sign under those circumstances?” The wife was awarded $175,000 per month in spousal support – the highest amount ever awarded by a Canadian court. The decision will be appealed to the Ontario Court of Appeal.

This case is a reminder that the process of entering into a marriage contract is extremely important.

If the circumstances are such that one spouse, to their detriment, had no real choice but to enter into the agreement, a later challenge by that spouse of the enforceability of a waiver of equalization rights and/or spousal support clause may be successful.

Read the article here.

 

Take away:

  • If one of the parties to the marriage contract “had no real choice but to sign”, that party might succeed (often years later) in challenging the enforceability of a waiver of spousal support and equalization rights. This will be especially likely if the wealthier spouse was too ‘greedy’ and the contract is so one sided that it does not even come close to what the other spouse would have received under the statutory regime.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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The Marriage Contract is a Couple’s Self-Made Law

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In Ontario, there is a default statutory regime that governs matrimonial property. However, if a couple preparing to wed or an already married couple wishes to avoid the default statutory regime, the couple may opt out of the regime by signing a marriage contract in which the couple shapes its own rights regarding property division.

This article is about marriage contracts in Ontario. The relevant legislation establishes a default regime that deals with matrimonial property at the breakdown of marriage. This default regime automatically applies to all couples unless the couple decides to opt out by signing a marriage contract. Once a marriage contract is signed, it will, for the most part, replace the property division provisions of the relevant legislation. However, it is important to note that the relevant legislation will still govern the marriage contract itself. For example, the legislation may allow courts to set aside marriage contracts if there is evidence that there was improper financial disclosure; one of the parties did not understand the nature and consequences of the contract; or if there is evidence of fraud, duress or undue influence when entering into the marriage contract.

Read the article here.

Take away:

  • Prior to getting married, it would be prudent to review and understand the applicable statutory regime to understand how property will be divided upon marital breakdown. If the couple believes the statutory regime does not suit their needs, they can consider entering into a marriage contract.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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No Marriage Contract: a $60 Million Mistake for Gwen Stefani?

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A marriage contract can save grief and tension between two splitting parties. By outlining the terms, prior to the dissolution of the relationship, and before the relationship/marriage begins, both parties will be very aware of the division of assets should the marriage fail.

By not signing a marriage contract/prenup, Gwen Stefani will be subject to court proceedings to determine the amount of money that will be given to her ex. His claim is that he should be compensated for being a stay-at-home dad and this could amount to more than half of her assets. A marriage contract outlining support terms would have helped this tension and protected the assets that she was bringing into the relationship.

Read the article here.

Take away:

  • Parties who enter marriage with substantial assets should consider a carefully drafted marriage contract.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Trending: Ins and Outs of a Pre-Nup

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The idea of creating a prenuptial marriage contract may sound unromantic but it is an idea that is quickly becoming quite common. The article draws an analogy between a seat belt and a marriage contract – you put one in place and hope you will never need it, but if you do, you’re glad it is there. At the very least, a discussion about a ‘love contract’ can help a couple communicate clearly about their financial situation, their financial goals and their approach to topics such as savings, spending, and debt. This can be an important preparation for marriage, since most marital disagreements are about finances.

In preparation for this discussion, and especially if the couple does not enter into a marriage contract, the article recommends making photocopies (or printouts) of all financial records (eg. bank accounts, investments, retirement, savings, loans etc), and establishing new savings and retirement plans for post-marriage monies. Keeping track of any payments made on a spouse’s debt is also recommended. At a minimum, three steps to create an enforceable marriage contract include: (a) don’t wait until the last minute to draft or sign a prenup as duress and stress close to the wedding date may invalidate the agreement; (b) be sure to hire separate representation for each party (paid for by each party separately); (c) beware of including penalties for fault (eg.

$50,000 for adultery) which may offend public policy, because divorce laws are now based on the public policy of ‘no fault’ marriage breakdown.

Read the article here.

Take away:

  • Discussions in preparation for a marriage contract need not be adversarial but can be structured to enhance the ability of the couple to communicate about financial matters, thus strengthening the relationship of the couple.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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The Second Marriage: Will a Marriage Contract Give Financial Protection?

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People who marry later in life and have accumulated assets (or debts) or are entering second marriages and have experienced the process of an acrimonious division of assets, are among those who may benefit most from a marriage contract. The question often posed is, ‘Will this contract actually protect my assets or income?’

This article discusses the Supreme Court of Canada decision in Hartshorne v. Hartshorne (2004). In that case, the wife (a lawyer) entered the marriage with no assets but with debt. The couple had one child before marriage and another after. The wife stayed home to care for the children. The marriage contract, signed on their wedding day, provided that the husband’s assets would not be shared with the wife ($1.6 million at the time of marriage), but that she would receive a share in the matrimonial home, and spousal support. She received independent legal advice that the agreement was one sided, but signed anyway. Upon separation, she was entitled to property worth $280,000 (plus support) and he was entitled to property worth $1.2 million. The SCC upheld the contract. Both parties were lawyers; both had independent advice; the wife knew the consequences of disrupting a career to care for children and had made that decision before the marriage; and the husband (a lawyer) was in a position to provide support according to the terms of the agreement.

It is important to note that although the agreement favoured the husband, it was not completely one sided: the wife did receive support and some marital assets. The net property difference between the statutory regime and the marriage contract was around $400,000.

The message from the Supreme Court of Canada appears to be: if the agreement is otherwise valid and there is no undue pressure or unconscionability, and the result is what the parties envisioned when they signed the contract, “a deal is a deal”.

Read the article here.

 

Take away:

  • As long as there is no undue pressure or unconscionability, courts may be willing to uphold a valid marriage contract, even if it is one-sided.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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