To Disclose or Not to Disclose – The Importance of Full Financial Disclosure in Marriage Contracts (Prenups)

Toronto family lawyers have witnessed a growing number of clients entering into cohabitation agreements and marriage contracts (prenuptial agreements). Traditionally, Ontario has a strong public policy favoring individuals contracting autonomy – deciding their own interests through contractual arrangements. This interest, however, is not absolute. The agreements addressing matrimonial issues (marriage contracts, otherwise known as prenups) are subjected to higher level of judicial scrutiny – far beyond that applied to contracts in general. While a well drafted and properly executed agreement carries a significant presumption of validity, it may nevertheless be voided by a court if one party is able to prove fraud, duress, lack of financial disclosure, lack of understanding of the terms or other inequitable conduct. Compiling financial information required under the full disclosure requirement can often be a tedious and even onerous task. It is no wonder that clients often ask their family lawyers to provide only partial disclosure. Such instructions, however, could have a potentially devastating effect on the future  enforceability of a domestic contract.

When entering into a domestic contract, both parties have a positive obligation to disclose all significant assets under s. 56(4)(a) of the Family Law Act (FLA). In a 2008 case, LeVan v, LeVan, the Ontario Court of Appeal awarded a $5.3-million equalization amount to a wife who waived her matrimonial property and support rights in a prenuptial agreement. The court invalidated the prenup on the basis that the husband  failed to disclose his full income and net worth to the wife. The facts of LeVan also touched upon another possible basis for challenging prenups. Namely, the wife signed the marriage contract merely two days before the wedding under threats from the husband to call off the wedding if she refused to agree.

The essential rule to follow when deciding how much financial disclosure to make can be summed up as follows:  to be considered full and frank, disclosure must be complete and adequate, and it must include not only assets and liabilities but also the contracting spouses’ respective incomes. One party’s failure to make full disclosure could easily be interpreted by a judge as a deliberate attempt to mislead the other spouse.

A New York state Petrakis decision is informative. Here, the judge tossed out a prenuptial agreement where a real estate mogul pressured his fiancée, to either sign a one-sided prenuptial agreement days before their wedding or he would cancel the wedding. He also told his fiancée that he would tear up the agreement as soon as they had children, which he then failed to do.

As the cases across common law jurisdictions evidence, if you are entering into a marriage contract, be aware of complex nature of these agreement and err on the side of caution. If you are planning on signing a prenuptial agreement, it is wise to have one qualified family lawyer draft it and another to review it before signing and provide you with the best possible legal advice. Your marriage contract lawyer in Toronto or elsewhere in Canada should draft an agreement that will stand up to judicial scrutiny and thereby protect your assets. To do his or her job, your family lawyer will need your full cooperation.

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Free Consultation in Family Law – Good Idea?

If it is free, why not take advantage of it, right? Yet, in that simple “F”  word lies the central problem with free family law consultations. In the arsenal of dirty divorce tricks and tactics, “poisoning the well” or “conflicting out” certain divorce lawyer so that your spouse cannot retain them takes a place of great distinction and infamy.

Here is how this ploy plays out: A husband or a wife makes an appointment with  top family and divorce lawyers in a geographic area. He or she proceeds to meets with each one in order to establish a solicitor-client relationship,  effectively preventing that lawyer from representing the other spouse. Of course, the lawyer-shopping spouse doesn’t actually have to hire any of these family lawyers. The entire goal with this tactic is to “conflict out” family lawyers so they cannot be hired by you. While celebrities frequently use this strategy, it is also a popular one in high conflict divorce cases, where the goal is not simply to win a legal battle but to inflict as much damage as possible (scorched earth approach). The lesson here is  twofold. First, do not procrastinate. While interviewing lawyers to find a good fit is perfectly acceptable and even advisable, being indecisive could cost you an excellent attorney, if you spouse gets there first. Second, when a lawyer tells you the consultations are not free, don’t get mad and jump to the conclusion that such decision is motivated purely by greed.

Once you have decided to meet with a lawyer, you need to be prepared to ask questions, evaluate and temporarily step back from the emotional charge of your separation. The following steps will go a long way towards maximizing the chances of a positive outcome in your family law or divorce matter:

Pick Your Battles Wisely

In many cases, during your first visit to a lawyer you may still be feeling of anger, betrayal or disappointment, following the breakdown of your relationship. You may feel overwhelmed, anxious and fearful, faced with financial and emotional uncertainty of the  future. All of that is normal. While these emotions are a necessary and even helpful part of a healing process, you should know that divorces can get expensive very fast, especially when spouses are unable to agree on the terms. This is not the time to be guided by volatile emotions. That is precisely why you need a realistic ally by your side. Your family and divorce lawyer will make sure to explore all possible ways to reach an out-of-court solutions and quicken the process, saving you a tremendous amount of money, which you put towards re-building your future.  Do not be shy to ask for an estimate on time and cost from your lawyer, especially if litigation is the only or the most likely option. Although your divorce lawyer may not be able to give you an accurate estimate during the initial interview, considering the uncertainties in law and evidence, you will at least have a general idea of ow you will be billed and what type of work you can expect to see on your invoice.

Take Notes

Go back to basics. Your may be nervous or preoccupied during your meeting with a lawyer, but make sure that you remember what is said. Take notes but don’be fixated on writing down revery detail of the conversation. Remember that the consultation also serves as a two-way interview where both, the family lawyer and  you need to dtermine if you are comfortable with one another.

Ask, Ask and Ask Again

Ask your family or divorce lawyer as many questions as you can think of during your initial consultation. Family law is a highly complex and constantly evolving area so no question is too silly or too obvious. After all, we are talking about your life here. Come prepared with a list of questions that you want answered about your case AND the lawyer him or herself. Be sure that you understand the answers  thoroughly and that they were answered to your satisfaction. This back and worth will also reveal a great deal about your prospective lawyer’s communication style. Family lawyers should be able to communicate with you in non-legal terms.

Cheaper Is Not Always Better

Let’s face it – hiring a lawyer is a little different than finding a pair of awesome jeans at Winners. Cheap legal services will often yield cheap results and may end up costing you more money in the long run. On the other hand, expensive is not always better either, unless you are have millions at stake and/or a highly complex case that is likely to drag through the appeals process. Follow the “Goldilocks Rule” and choosing a moderately priced family lawyer who offers honest, effective and most importantly, personalized service. Making the right decision the first time could end up saving you quite a bit.

Bring the Paperwork

As a family and divorce lawyer, I want to know as much as possible about situation, before I give you my legal advice. Seeing your tax returns, bank accounts, prior agreements, detailed childcare history and any other evidence that you may believe is material to your case will make my job easier and my advise more accurate and tailored to your circumstances. Knowing the other party’s income, finances, property, and debt would make me even happier.

Often times, consulting with a solicitor is a person’s first step in beginning a family law case.  More often still, consulting with a divorce lawyer marks the end of a significant chapter in your life. Allow yourself to be unsure. You do not need to know exactly what is going to happen next.. That’s what your family or divorce lawyer is there for.

Happy Hunting!

Ivan J. Steele, M.A., J.D.,

Ivan Steele, Toronto family and immigration lawyer

Ivan Steele, Toronto family and immigration lawyer