In a 1996 Seinfeld episode, the character George Costanza devises a hare-brained scheme to get out of an engagement – he asks his fiancée to sign a prenup.
The premise of his plan, which ultimately falls apart, is that his fiancée would see it as a red flag and break off the engagement. But times have changed in the 30 years since that episode aired.
Now, more than half (51 per cent) of Gen Z Canadians say they’d want their partner to sign a prenup if they got married or entered a common-law relationship, a recent survey by TD Bank shows.
This is significantly higher than the national average of 28 per cent.
“They are much, much more comfortable having these conversations than older Canadians,” said Jeet Dhillon, senior portfolio manager at TD Wealth Management.
You could call it a prenup, a prenuptial agreement or a cohabitation agreement, but the underlying sentiment is the same: a legally binding written document signed by two romantic partners before they marry or enter into a relationship, be it marriage or a common-law partnership.
It lays out how financial assets, debts, real estate and benefits will be split in case the couple break up.
This preference is, in part, because Canadians are getting married later in life, said Alexa Turner, family lawyer and mediator at Toronto-based law firm Resolve Dispute Resolution.
In the 1970s, the average age of Canadians getting married was in their mid-20s.
By 2020, the average age of marriage in Canada was close to 35.
Couples today have built up a lot more of their individual lives before they even meet, Turner said.
“We’re just coming to the table with more — more knowledge, more assets, maybe more debt, maybe more risk if we’re starting a business,” she said.
The Hollywood stereotype of the wealthy man getting his wife-to-be to sign a prenup to protect his wealth doesn’t quite hold up for most Canadians today, said Amanda Baron, co-founder of Jointly, an online platform that helps couples navigate the legality of signing a prenup.
For one, women earn a lot more today than they did in the 1990s when compared to men, she said.
In 1976, only around 35 per cent of mothers aged 25-54 in Canada worked. In 1996, this number was around 65 per cent. Today, it stands around 80 per cent, data shows.
“I like to use the analogy of a merger versus an acquisition,” Baron said.
“When women didn’t have economic power, it was kind of an acquisition. Now we’re dealing with a different economic situation, where usually there’s two working parties. People are coming in with their own assets and it’s more of a merger.”
It’s a common misconception that prenups are only for billionaires, celebrities and the uber-wealthy, Turner said.
Get daily National news
Get the day’s top news, political, economic, and current affairs headlines, delivered to your inbox once a day.
“If you are coming into a relationship with any kind of real estate, you need to call a lawyer,” she said.
“If you have a tremendous generational wealth, you’re a beneficiary of a trust, you expect to get a lot of money, you own shares of your family’s business — anything where there’s intermingling of generational wealth or an anticipation of that — you need an agreement.”
Anyone who owns any kind of business should also consider having it worked into an agreement, she said.
“You probably want to consider whether you need an agreement if you have your kids or any kind of dependents from a prior relationship.”
If you get sizable help for your down payment from your parents, you may want to protect your equity against your partner’s, she added.
Prenups can also make things clear going forward, Nikhil Behl at FICO said.
“The value of a prenup isn’t about planning for separation. It’s about being clear on what’s shared and what isn’t from the start. That clarity makes it easier to manage money day to day, because you’re not constantly negotiating boundaries as you go,” he said.
Younger couples often think of getting a prenup as “insurance,” Turner said.
“You’re doing an agreement that doesn’t come into force in effect unless you separate,” she said.
But signing a prenup doesn’t have to mean you’re planning for a relationship to fail, Baron said.
“I’m getting car insurance because I’m trying to be responsible, not because I think I’m going to get into a car accident,” she said.
Depending on where you live — because the terms of what can be covered under a prenup or cohabitation agreement can vary by jurisdiction — a prenup can typically contain anything from who owns what share of which asset to how a couple will navigate shared debt to who gets the family cat if they break up, Baron said.
“We actually build pets into our agreements because we know it’s really important to young generations, myself included,” she said.
However, Turner said something to keep in mind was that you cannot make any parenting plans for children that haven’t been born yet.
“If you don’t have children, you can’t create a parenting plan, which a lot of people actually seek to do,” she added.
However, prenups and marriage contracts can work in spousal support in the event one parent has to take time off work to raise children. Even a few years off the job market can place the child-rearing partner at a disadvantage, Baron said.
In that event, some couples choose to agree to spousal support in advance.
“If things don’t work out, you’re not operating at a huge disadvantage because of the sacrifices you made for your family,” she said.
“It’s really great for women who are planning on taking those kinds of career breaks. And it’s a good conversation to have with your partner before you even make those decisions.”
Between 2023 and 2026, around $1 trillion in inheritance is on track to have been passed down from boomers to their Gen Z and millennial children, according to the Chartered Professional Accountants of Canada.
When their children choose to marry, some families “want their wealth to stay within their own family,” Dhillon said.
Any inheritance you receive that you place, even temporarily, in a joint account may be subject to division, she said.
Your prenup can and should work “in tandem” with your will, said Erin Burry, CEO of Willful, an online platform that helps Canadians create their wills.
“It’s very common, especially with blended families. I might set up what’s called a spousal trust that says, I leave everything to my spouse, but when my spouse passes away, those assets revert to my children. It’s a way of saying, my spouse can’t cut my kids — their stepkids — out of their inheritance,” she said.
The thing to remember with a prenup is that you will want to get started as early as possible, Burry said.
“I didn’t know that when you get a prenup, you each have to have your own legal representation. You can’t do it the week before your wedding because you’re supposed to leave a lot of time to get this done,” she said.
The “rule of thumb” is that you want to get started around six months before your wedding, Turner said.
“We don’t want anyone to feel like they’re pressured to sign this agreement because there’s an upcoming wedding or move-in date,” she said.
Your lawyers are also likely to ask you for financial disclosure. This includes transparently laying out all your assets and debts in front of your partner’s lawyer and vice versa, she said.
But how do you broach the subject if it’s something you’ve been worried about?
“Do not call it a prenup. The connotation feels really scary,” Turner said.
Most people know someone who went through a messy divorce or separation, Baron said. One way to approach a conversation with your partner can be to say you don’t ever want that to happen to you, she said.
Baron said her own divorce and lack of a prenup was what prompted her to consider making it easier for more people to set those terms clear.
“If we can get people normalizing these conversations, having them early, getting things written down, hopefully we can keep more families out of that really tough process at the end of a relationship,” she said.
Read the full article here
