Look What You Made Me Sign

It's a Love Story, Baby, Just Say Yes...to my marriage contract

By Danielle Sawh

If you haven't already heard, T. Swift and Travis Kelce announced their engagement and will live happily for "evermore".

While I have no doubt the wedding will be charming, everyone (or at least family lawyers) is wondering...if they separate, will Travis get a financial benefit from [Taylor's Version] and her other work from the last two decades? Or will TS "Speak Now” and sign a marriage contract that keeps the two financially independent from the other in the event of a separation?

We may never know. However, this does raise the question: can I keep my assets separate from my spouse through a domestic contract?

The short answer is yes. The longer answer requires an understanding of the view that the law takes on marriage. In Ontario, the law views marriage as an economic partnership. Without a marriage contract, separating spouses are subject to Ontario family law, and their rights and obligations upon separation are generally limited to what the law provides.

In Ontario, one of the primary financial issues that arises upon the separation of married spouses is the equalization of the net family properties. The law is designed to have spouses leave their marriage on approximately equal financial footing, and this is achieved through the equalization process. This means that each spouse has the right to share in the growth in the net worth that accumulated over the marriage – in other words, married spouses usually share the value of their property if they separate. Calculating this growth in net worth (which is called the "net family property") takes into account all assets and debts that each spouse owned on the date of marriage and on the date of separation (subject to certain exclusions). The spouse with the higher net family property will generally pay the other spouse a cash payment representing one-half of the difference in their respective net family properties.

Taylor will undoubtedly be bringing significant assets into her marriage, which will likely grow over time. If the two were subject to Ontario family law, these assets might form part of her net family property which Kelce would have access to under the equalization regime if the couple separated (and we know that Taylor doesn’t like a “gold rush”).

However, two people who are married or who intend to marry can enter into a marriage contract that varies these rights under the law. This is quite common when one spouse has a significant asset they are bringing into the marriage that they want to keep separate from the other spouse. But marriage contracts can come with a lot of risk. This is because the circumstances at the time of the marriage can be vastly different from the circumstances at the time of a separation, and domestic contracts that may seem fair at the time of the marriage may be very unfair at the time of separation. Because the law views marriage as an economic partnership, if a marriage contract is one-sided, benefits only one party, or contains terms that take away one spouse’s rights without that spouse receiving anything in return, then those terms may be set aside by a Court in the future if there is a dispute between the spouses.

Understanding when a Court might set aside a marriage contract is important at the time of writing the agreement. There is little sense in making a poorly drafted or one-sided marriage contract and then, at the time of separation, risk having it set aside by the other spouse and be left wishing "Would've, Could've, Should’ve".

A lack of financial disclosure, a lack of understanding about the nature and consequences of the agreement, and undue influence/pressure are all common grounds on which a Court can set aside a domestic contract. But with marriage contracts, a Court will also be looking at the process for how the terms of the agreement were reached, and the fairness of the terms themselves in light of the circumstances of the parties at the time of separation. Some important reminders when thinking about signing a marriage contract are:

1. Exchange full financial disclosure prior to signing the agreement. A spouse usually can't truly know what they might be agreeing to, or giving up, if they don't have the full financial picture at the time of negotiating a marriage contract;
2. Fair bargaining process. It probably will not appear to be fair if one spouse hands the other spouse a one-sided marriage contract they drafted on their own and says "sign it". Engaging in the negotiation of terms is an important part of a fair bargaining process;
3. Balanced, fair terms. If one spouse has significantly more wealth or income than the other and wishes to insulate all of their income and assets from the other spouse, what is the other spouse getting in return for giving up their rights? A marriage contract that protects only one spouse's finances from the other and keeps the two fully financially independent from the other with no benefit to the disadvantaged spouse may not appear "fair" if the parties separate. This is particularly true when it comes to spousal support waivers/releases. Again, the law is designed to keep both spouses on generally equal financial footing upon separation (with certain caveats), and a marriage contract that defies this goal may run into issues and risk being set aside in the future; and
4. Independent legal advice. If a party does not understand the nature, or the potential consequences, to the marriage contract they are signing, this may increase the risk that the agreement may be set aside in the future. Having independent legal advice can mitigate this risk and is a crucial step in signing any domestic contract. In addition, the wording/drafting of the marriage contract itself is important, and having a family lawyer prepare a properly drafted agreement can help strengthen the agreement to withstand the test of time.

These are only some of the important items to consider when thinking about entering into a marriage contract. While marriage contracts can be helpful tools to provide spouses with clear expectations about their rights and obligations in the event of a separation, they should be drafted properly with an eye on the potential risks that may arise. Marriage contracts are not for the "Delicate" and should be approached with caution, and expertise.

So, as autumn leaves fall down like pieces into place, if you would like to discuss domestic contracts with a family lawyer, contact Danielle Sawh at dsawh@sorbaralaw.com.