A DIY Prenup Can Cost More Than a Lawyer: Why Alberta Domestic Agreements Need Careful Preparation

Cohabitation agreements, prenuptial agreements and postnuptial agreements can help couples decide in advance how financial matters will be handled during their relationship and if the relationship ends. They may address property, debts, businesses, investments and other significant financial interests.

For some couples, the temptation is to prepare an agreement themselves using an online template or wording borrowed from another document. If both partners agree on the outcome, involving lawyers may seem unnecessary.

However, the real value of a domestic agreement is often tested years later, when the relationship has ended and one person challenges it. At that point, questions about independent legal advice, financial disclosure, voluntariness and the circumstances in which the agreement was signed can become extremely important.

Alberta Couples Can Make Their Own Property Arrangements

Alberta’s Family Property Act allows spouses and adult interdependent partners to make agreements governing the ownership and division of property rather than relying only on the statutory property-division rules.

Depending on the circumstances, these agreements may be described as cohabitation agreements, prenuptial or premarital agreements, postnuptial agreements or interspousal contracts. Some are intended to operate only while the parties are unmarried, while others contemplate both cohabitation and a later marriage.

The important distinction is that agreeing about what should happen is not necessarily the same thing as creating an agreement that will withstand a future legal challenge.

Signing a Document Is Only Part of the Process

A domestic agreement may affect a home, investment portfolio, pension, corporation, inheritance or other property worth hundreds of thousands or even millions of dollars.

It may also require one or both parties to give up rights they would otherwise have under Alberta law. Therefore, each person needs to understand both what the law might provide without an agreement and how the proposed contract changes that result.

A DIY document can also create uncertainty. Language that appears straightforward today may be difficult to apply later to a business that increases in value, a jointly purchased home, a significant inheritance or other major financial changes.

Independent Legal Advice Is More Than a Formality

Independent legal advice is particularly important under Alberta’s Family Property Act. For certain agreements that contract out of the statutory property regime, each person must make a written acknowledgment separately from the other person before a different lawyer.

That acknowledgment addresses whether the individual understands the nature and effect of the agreement, understands the potential property claims being surrendered and is signing freely and voluntarily.

This makes a kitchen-table agreement very different from one prepared through a process in which both partners have the opportunity to receive independent legal advice about their rights and obligations.

Why Each Partner Needs Their Own Lawyer

Even where a couple agrees on the proposed terms, their legal interests are not necessarily identical. Separate lawyers allow each partner to ask questions privately, understand what they may be gaining or giving up, and assess whether the wording reflects their intentions.

The process can also create a clearer record that each person had an opportunity to understand the agreement before signing it. That may become important if one party later alleges that they did not understand the document, were pressured to sign or were unaware of the rights they were giving up.

Financial Disclosure Helps Make Consent Meaningful

A person cannot realistically assess a financial agreement without knowing what financial interests are involved. Disclosure may include information about real estate, bank and investment accounts, pensions, registered accounts, corporations, partnership interests, trusts, significant debts and other assets or liabilities. The appropriate scope depends on the couple’s circumstances and the issues the agreement is intended to address.

Financial disclosure is not expressed in Alberta’s Family Property Act as a universal statutory prerequisite to every domestic agreement. However, inadequate disclosure can create significant problems, particularly where one person later argues that they did not understand the financial circumstances or the bargain they were making.

DIY Agreements Can Miss the Details That Matter

Templates are particularly risky when a couple’s finances are not straightforward. An agreement stating that each partner will “keep their own property,” for example, may not clearly address what happens if one person sells premarital property and uses the proceeds to purchase a jointly owned home. Similar issues can arise where separate funds are mixed with joint assets or where one partner contributes to the other’s business or property.

Business owners may also need to consider corporate shares, shareholder loans, retained earnings and future increases in value. Pensions, stock options, investment properties, inheritances, family trusts and assets outside Alberta can add further complexity.

Circumstances Can Affect an Agreement

The circumstances surrounding signing can also matter.

Allowing time for disclosure, legal review, negotiation and revisions can help create a clearer record that the agreement was considered carefully rather than signed under pressure or duress.

Agreements Should Account for Changes in the Relationship

Couples who begin living together before marriage should consider whether their agreement is intended to continue if they later marry, and should specifically account for those decisions.

Similarly, married couples may decide to enter into a postnuptial agreement after their circumstances change. One spouse may have started a business, received an inheritance, accumulated significant investments or become involved in a family enterprise.

In either situation, the agreement should clearly reflect the parties’ intentions and address the stage of the relationship in which it is expected to operate.

The Real Cost of a DIY Agreement May Appear Years Later

The attraction of a DIY agreement is understandable. Templates are inexpensive and easily accessible.

The difficulty is that the purpose of the agreement is not merely to record what both people agree to today. It is to establish rights and obligations that may need to be interpreted and enforced years later, after finances and relationships have changed considerably.

Legal involvement at the outset can help identify missing information, clarify ambiguous wording, address disclosure, explain the rights affected by the agreement and satisfy applicable independent legal advice requirements.

Contact DBB Law in Calgary to Protect Your Financial Future With a Domestic Agreement

Whether you are moving in with a partner, preparing for marriage or considering an agreement after marriage, the family lawyers at DBB Law can help you understand how a cohabitation agreement, prenuptial agreement or postnuptial agreement may affect your property rights and financial obligations.

We help clients across Alberta with drafting, reviewing and negotiating domestic agreements involving family property, businesses, investments, real estate and other significant assets. We can also provide guidance on financial disclosure and independent legal advice requirements. To schedule a confidential consultation, please contact us online or call 403-265-7777.