People often ask how they can protect their property when entering a relationship and or how they can protect their property leaving a relationship. There are preventative measures available to you. It is important to speak to a knowledgeable lawyer to ensure you have a clear understanding before it is too late.
Pre-Nuptial Agreements (PNA) and Cohabitation Agreements (CA) are vital in Alberta to protect your personal property from default equalization legislation. The default equal division is a legal presumption. To give effect to an unequal division, the onus is on the party seeking the unequal division to prove the presumption can be rebutted. This article is not an interpretation of the presumption or how to rebut the presumption. This article is concerning the vital importance of protecting your property.
The Matrimonial Property Act only dealt with the property, or the equity, acquired during the marriage. As of 1 January 2020, the Family Property Act expanded the presumption of equal division of family property to unmarried persons living in Alberta. More people are living together outside of a marriage than ever before. We have heard lawyers say, ‘when you say I do, you say I share.’ Perhaps more people are choosing a non-marital status believing that this presumption does not apply to them. This would be a mistake.
Once you enter an Adult Interdependent Partnership (AIP, aka common-law), you subject your property to the same legislative presumption of equal division as if you were married. There remains only two-ways to protect your personal property from the presumption of equal division: PNA and or CA.
A PNA is an agreement entered into prior to marriage. A CA is an agreement entered into prior to cohabitation. A CA will likely have a condition that upon a marriage, the CA will become a PNA. We do see people enter into such agreements during the relationship and there are some concerns with the timing of the same that you must discuss with a lawyer. This article will presume that a PNA or CA are entered into before marriage or cohabitation.
Many people seek a PNA or CA but do not fully understand what the specific design is dedicated toward. A PNA and CA are designed to contract the parties outside of the presumption, in other words, outside of the legislation. These agreements do more than protect your assets coming into a new relationship. They are designed to continue that protection throughout the new relationship if that is your plan.
The legislation already protects the value of an asset coming into the relationship. The main issue is protecting the wealth the asset generates during the new relationship. The presumption is what these agreements specifically address. Conversely, if such an asset depreciates, the other partner can be protected from a potential correlated debt.
It is common for a person to be uncomfortable bringing this issue up with their new relationship. These agreements are not always or only about keeping your property safe from the other person. Parties can design their own separation agreeement in the event the relationship does not work out. This avoids the stress of the presumption, and or the unknown. The parties can designate specific relief including support, and or how assets are to be managed following a breakdown. What you are investing in is not much different than an insurance policy. We have insurance to protect us not only from another’s conduct, but at times our own.
PNA and CA can reduce stress and excessive legal costs when relationships breakdown. More young adults are living together prior to committed relationships than ever before. When are property rights triggered? How generous can a person be to another before a line is crossed or blurred enough to trigger proprietary arguments? What about protecting property given by another not intended to be shared? What are the risks, and am I prepared to take that risk?
Given the social and political environment we now face, and the presumptive division of your wealth, we highly recommend that you discuss a PNA and or CA with a lawyer at Grey Wowk Spencer LLP. Our skilled family lawyers can create a PNA or CA that is tailored to your specific situation and needs.
