Should I get a Cohabitation or Marriage Agreement (Prenup Agreement)?

Do you know what would happen to your living arrangements, property, finances, or estate planning if your relationship ended? Most people don’t, and when a relationship ends, disagreements can arise.

A Cohabitation Agreement (for common law spouses) or Marriage Agreement (for soon-to-be married spouses) lets you make these decisions in advance, providing clarity and protecting interests.

When Spousal Status Applies

In British Columbia, the law treats couples as legal spouses if:

1. they are married, or
2. they have lived together in a marriage-like relationship for at least two years (“common law spouses”). Even if they do not live together full-time, a relationship may still be considered marriage-like under the law, depending on the circumstances.

Default Law

If a relationship between two legal spouses ends and there is no Agreement, the default family law rules apply, meaning that: 

1. family property is generally divided on an equal basis, and
2. spousal support may be payable.

Property

To understand the default rules regarding property, it’s important to understand what family property is.

In British Columbia, property is divided into two categories:

1. family property, and
2. excluded property.

Family property includes everything the spouses own at the time they separate, regardless of whose name it is in. It also includes any increase in value of excluded property. By default, family property is divided on a 50/50 basis when a relationship ends.

Excluded property includes things owned before the relationship began, as well as certain gifts or inheritances, some settlement money, certain insurance payouts, and some interests in trusts. By default, excluded property is not divided when a relationship ends.

Example: If Morgan moves into Alex’s house worth $500,000 in 2020, and they separate in 2025 when the house is worth $800,000, Morgan could be entitled to half of the $300,000 increase in value ($150,000), even if Morgan did not financially contribute to the house during the relationship.

Spousal Support

In British Columbia, the default law can require partners to support each other financially after a separation, even if they were never married. Spousal support isn’t automatic, but it may be ordered if there is an economic disparity between the partners or if one partner experienced a financial disadvantage because of the relationship.

What Can an Agreement Address?

Among other things, an Agreement can allow spouses to:

1.  opt out of the default property division rules, and
2. address spousal support.  

The general benefits of an agreement are:

1. allocation of costs, answering questions such as:
   1. who will pay for the mortgage during the relationship?
   2. who will pay for groceries during the relationship?
   3. will any costs be split during the relationship?
2. certaintyregarding living arrangements, answering questions such as:
   1.  who will remain in the house if the relationship ends?
   2. will the surviving spouse get to remain in the house after the death of the other?
   3. will the house be sold and the proceeds divided, or will there be an opportunity for a buyout if the relationship ends?
   4. at what point can the house be listed for sale after separation? Can one spouse impede the sale of the house?
3. protectionof interests, answering questions such as:
   1. will the spouses’ property, pension or investments be divided?
   2. will a spouse’s corporation be impacted?
   3. will a spouse have to pay spousal support?
4. clarity and certainty on the terms that will apply if the relationship ends, answering questions such as:
   1. will one spouse receive spousal support?
   2. will the spouse that remains in the house be responsible for the mortgage?
5. reduction in conflict if the relationship ends, which often:
   1. allows for a faster resolution
   2. decreases legal costs
   3. maintains civility between the spouses, helping to protect mutual friendships from being negatively impacted
   4. decreases emotional stress
6. reduction in the risk of costly disputes if the relationship ends by including terms that:
   1. require the parties to attend dispute resolution, such as mediation, before court
   2. clearly delineate each spouse’s interest in property, leaving less room for argument
   3. specify if spousal support is payable, leaving less room for argument
7. preservation of estate planning intentions by ensuring assets pass to intended beneficiaries, rather than being altered by family law claims.