While most planning related to weddings is of the fun variety, it’s not uncommon for couples to consider marriage agreements (also known as pre-nuptial agreements, or “prenups”) in situations where they want to agree on what might happen to property or with spousal support in the event the marriage breaks down. In a recent decision from the Ontario Superior Court of Justice, the court had to decide if the proceeds from the sale of a property that was excluded from the equalization of net family properties can be excluded or if it creates a new property that was not covered by the marriage agreement.

Husband and wife sign cohabitation agreement

The parties involved began living together in 2008 and were married in 2010. They started to discuss a marriage contract in the year leading up to their marriage. The husband had originally proposed a long and detailed contract, but the wife worked with her lawyer to draft a simpler version. The husband and his lawyer negotiated certain provisions and the parties came to agreement.

The section of the marriage contract relevant to today’s topic was in relation to the division of property. The agreement provided a list of property owned by the husband and a list of property held by the wife, stating that the property listed would not be factored into the equalization of net family property, which means that it will remain the property of whoever owned it prior to the marriage. The agreement also provided for a mutual waiver of spuosal support, and that the wife would be given the matrimonial home in the event of divorce.

One of the properties listed as the husband’s was a corporation. The corporation was the sole shareholder of a concrete company. The company was valued at $4,900,000 at the time of the marriage, and the husband sold it for more than that amount in 2011.

When the parties separated, the wife claimed that the money earned form the sale of the company should be not be “traced” or tied to the original agreement, instead arguing that the sale created a new property which was not included in the husband’s list of property to be excluded.

The husband’s position is that the money from the proceeds of the sale of the company was not new property, and that it should be considered an extension of the company and should therefore be traced, or attached, to the list of exclusions.

Can the proceeds of the sale of excluded property be included in a list of excluded property?

The court looked at the context surrounding the marriage agreement. And stated that the mutual and objective intentions of the parties was that their pre-marriage property and the property which could be traced from it was still solely owned by the individual spouse, and that such property would be excluded from any equalization claim in the event the marriage broke down. As a result, the court ordered that the proceeds from the sale of the husband’s property is excluded from equalization.

At NULaw in Toronto, our family lawyers can review a pre-existing marriage agreement or draft a new agreement. We will also fight to enforce marriage contracts if necessary and help you secure what you are entitled to. We are dedicated to protecting you and your assets, and helping you plan for your new life. Contact us online or at 416-481-5604 to book a consultation.