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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What Do Family Lawyers Do Anyway? A Toronto Family Lawyer’s Thoughts on Our Unique Role in Marriages, Upon Separation and Divorce

Ivan Steele, Toronto family and immigration lawyer

Ivan Steele, Toronto family and immigration lawyer

Family lawyers have received a colorful and varied treatment in the media. From blockbuster Hollywood movies (think Catherine Zeta-Jones and George Clooney in “Intolerable Cruelty” to lawyer dramas and sensational news articles, we are frequently led to believe that family and divorce lawyers invariably fall into one of two categories, neatly pre-packaged for late night television enjoyment.

If you are a family lawyer, you must be either a high flying, insufferable, impeccably dressed shark, with Ben Franklins bursting out of your leather Prada briefcase (that incidentally costs more than an average car). Alternatively, you are a kind hearted, dedicated, legal aid, politically correct, save the children (and the whole word while you are at it) type. Production variety demands minor character twists and idiosyncrasies, but for most part, these archetypes prevail.

I am a family lawyer in Toronto, Canada, formerly trained as a psychotherapist. In a few years that I have practiced family law, I have encountered several walking caricatures and self-proclaimed legal celebrities (you know who you are) roaming the hallowed hallways of Her Majesty’s courts, with egos and wallets too inflated for everyone’s comfort. And yes, the crunchy, earthy, granola types also abound. These fringe types notwithstanding, a majority of family lawyers in Toronto are kind, industrious and balanced individuals, dedicated to their craft, their clients and their families (you have to learn something from seeing broken families day in and day out).

So what do most of us do that is so darn important and that justifies our (greatly variable) hourly rates? While no profession is immune to greed and bad judgment, despite the prevailing stereotypes, family lawyers are a caring bunch. We do run our businesses and need money to support our families, but we earnestly try to help our clients to live their lives on their terms, within practical and legal constraints.

Marriages are great – until they are not. If we do our jobs right, we are the best prevention and the best remedy for all parties in failing marriages. We take on your worries, cope ԝіtһ the legal, emotional and practical headaches that plague once happy unions, and we try to find the best solutions for your children. Because divorce is emotionally volatile, we are here to provide objectivity and guidance. What family lawyers do not do is make decisions about your lives. That is your responsibility and we are here to try and bring your plans to life, whenever possible.

Along with psychologists and psychiatrist, we are the confessors of the modern times. We actively listen to your stories and then we think, plan and strategize about issues involving children, visitation rights, property division, spousal abuse, spousal support, divorce etc.

The bеѕt time tо hire one of us іѕ bеfоrе you get married. I will get angry letters for this – I just know it. Sounds cynical? “Where is the trust?” you may be asking? While creating а prenuptial agreement (marriage contract) mау ѕееm like a cold and calculated decision rooted in mistrust, this piece of paper may be the kindest thing that both spouses can gift to one another – ever. If you are married for life, you will never look at this document again. If your marriage breaks up, however, a marriage contract will set оut precisely һоԝ your property will be divided and how much, if anything, you need to pay to your spouse as support. While prenups have limitations (i.e. cannot agree on a custody of a child), they are true money and sanity savers. Divorce proceedings and protracted, contentious negotiations leading up to a Separation Agreement саn wipe оut аn average savings and eat significantly into your retirement funds.

If you separate without a domestic contract in place, do not despair. We are here to make your separation as efficient and cost-effective as possible. The billing horror stories that fill the family lawyer lore are true, but not as prevalent as the rumors would lead us to believe. While paying a family lawyer is not cheap, being reasonable and following sound legal advice will save you a great deal of money in the long run.

When selecting a divorce lawyer in Toronto or elsewhere, be picky (but not unreasonable. Unfortunately for everyone involved, we are not wizards. If we were, would we still be working?) Legal expertise is important but insufficient by itself. Honesty and transparency are essential. Make sure that a family lawyer that you retain is someone that you like and that can relate tо уоur life and your circumstances. Judgment and bias have no place in our line of work. Consult ԝіtһ friends who went through a similar process, but do not expect your case to mirror theirs. Your life is unique and your family matter will be as well. Read reviews іf any are available. In the end, with some research and a bit of good luck, you will find a family lawyer that is just right for you.

Ivan Steele, M.A., J.D.  – Ivan Steele Law Office

Savvy Couple’s Guide to Marriage Contracts in Ontario

Life is filled with surprises, but your financial future should not be one of them.

Marriage contracts exist to limit your financial exposure in the event that your marriage does not work out. Full financial disclosure is crucial in negotiating a marriage contract, as this requirement of financial transparency is designed to bring forward any issues that could lead to potentially dangerous surprises down the matrimonial road.
Marriage contracts are among the most sensitive and emotionally charged legal documents. Negotiating a cohabitation agreement or a marriage contract runs contrary to most people’s ideal of romantic relationship because such an agreement requires contemplating dissolution. Nevertheless, entering into a domestic contract is better seen as a sign of mutual respect as it is rooted in the belief that your relationship is strong enough to handle serious discussions about each party’s needs. One thing that I have learned as a family lawyer in Toronto is that rather than a repudiation of a relationship, domestic contracts are a prudent and practical move that establishes and protects everyone’s property rights. Entering into a domestic contract can save you strife and expense of litigation down the road, or at the very least provide a peace of mind.
In recent years, marriage contracts, otherwise known as prenuptial agreements  (prenups or post-nups) have been gaining favour with Canadians. These domestic agreements are designed to protect each person in case of abreakdown of a relationship and divorce and alter the general property rights and various other legal entitlements of married couples.
Here is a summary of what marriage contracts can and cannot do for you:
·       1. Marriage contract usually change the equalization of net family property, by defining ownership of certain pieces of property between your spouse and yourself.
·       Not only will a marriage contract safeguard all of your pre-marriage assets in the even of divorce, but it will also shield you from having to share any increase in the value of property that you owned at the date of marriage. When drafting a marriage contract, you can also determine who will have ownership of any secondary or assets that you purchase    together over the course of your marriage.
·       By entering into a marriage contract, you will likely be safe from pre-marriage debt, financial issues, business ownership, or loans that your spouse may have incurred, and you will be able to address in a mutually satisfactory fashion the division of any joint debts and liabilities.
·       Marriage contracts can provide peace of mind by helping you and your spouse avoid disputes over asset distribution and they can spell out what gifts or inheritances will be shared or held exclusively by one spouse or the other.
·       Under some circumstances, a marriage contract can either do away with spousal support obligations or modify them in a manner that reflects both parties’ values and concerns.
·       A marriage contract can be a useful indicator of intent concerning each parent’s right to direct the education and moral training of their children.
Despite its initial appearance as a magic wand for the divorcing couples, a marriage contract has limitations. Some of the most important ones are the possession of the matrimonial home and the custody of the children.
1) Part II of the Family Law Act provides that each spouse has an equal right of possession of any matrimonial home and that neither party can sell or mortgage a matrimonial home without the written consent of the other spouse. Any provisions in a marriage contract purporting to limit these rights are unenforceable.
2) Marriage contracts cannot prospectively determine the custody of the children or the children of the marriage, as such decisions are subject to the best interests of the child test. In the determination of matters respecting the support, education, moral training, or custody of a child, a judge may disregard any provision of a marriage contract.
No marriage contract lawyer can work miracles. Marriage contracts are expected to be fair and reasonable legal agreements that are designed to protect both parties over the long term. Please note that drafting a patently one-sided agreement may run the risk of undermining the enforceability of the marriage contract in the future under various common law and equitable doctrines. As always, to ensure that your rights are protected, contact a knowledgeable Toronto family lawyer.
Ivan Steele, B.A., M.A.,J.D.
Barrister and Solicitor
Ivan Steele Law Office, 33 Wood Street, Suite 1709, Toronto, Ontario M4Y 2P8, Canada
Phone (647) 342-0568
Fax (647) 344-4493