Discussing Pre-nuptual Agreements Important
New Family Law Act in BC triggers wealth preservation considerations.
New provincial laws makes marriage or co-habitation agreements much more important, and therefore critical for advisors to include in conversations with their clients. The new Family Law Act came into force on March 18th in British Columbia, for example, but the effects of this legislation may take years to fully realize. The important aspects to be studied is how the new Act will affect asset distribution, not only in matrimonial relationships, but also regular co-habitation arrangements in British Columbia.
Although the new Act provides an avenue of asset preservation by allowing individuals to enter into an agreement to protect all assets brought into the relationship, the Act will deem partners who have a child or have been cohabiting for two or more years to be spouses, with asset division resulting from any breakup of that relationship. Without such an agreement though, the partner who brings fewer assets to the table no longer has to prove “contribution” and will be treated as a spouse for asset division purposes. This might catch many couples off guard because intention is not a factor in this deemed relationship.
A welcome change in the new Act is the law pertaining to inheritances – they no longer have to be shared with your spouse and are presumed to be yours. Therefore, parents who want to provide directly for their children and protect family wealth will be able to use this new law as an estate-planning tool. This change is welcomed because with the aforementioned deemed spousal rule, many unintended complications can be avoided with prudent planning.
Under the new Act, the courts will look at pre-nuptial agreements with less scrutiny, so long as they are not perceived to be terribly inequitable.
Agreements that are entered into prior to co-habitation will be very important. The way in which these are drafted will also be important. For instance, the value of the items brought into the relationship must clearly be stated at the outset.