All About Estates

Are Domestic Contracts Becoming More Popular?

When I explain to people whom I’m meeting for the first time that I’m a lawyer and that among my areas of practice I draft domestic contracts, I’m often met with a response to the effect of “You mean, like, a pre-nup?”

I can confirm that a “pre-nup” is, in fact, what I mean.

In Ontario, they’re called domestic contracts, and they can take one of two forms:

  • marriage contracts, for spouses who are married; and
  • cohabitation agreements, for common law spouses (i.e. spouses who cohabit with each other continuously in a conjugal relationship but are not formally married).

These contracts can provide that upon a relationship breakdown certain aspects of family law are modified. These contracts can override the existing law with respect to division of property, spousal support, and the treatment of any family residences, among other things.

That being said, instead of going into the law of domestic contracts in detail, I’d like to briefly comment on what I perceive to be a changing societal attitude to domestic contracts. For example, when I discuss this topic with friends of mine, I think more often than not many of them would at least consider getting one. Certainly, numerous people in my life have asked me to explain at a high level how they work.

For context, I’m thirty years old as of the date of this blog post. Based on my own experiences, I predict that millennials, Gen Z and succeeding generations of people will increasingly use domestic contracts for their relationships. I think that there are several reasons for this:

  • First and foremost, I do not believe that society places as much importance and emphasis on the “nuclear family” as it once did. This will of course vary from culture to culture, but I think that many people understand that blended families and other types of relationship structures are becoming more prevalent in our world, and that there is no one way to have a family.
  • This increased level of societal consciousness is a result of our increased technological proficiency. Relationships are now more visible than ever because we have more access to information about relationships than ever before. Through the use of social media, we can now broadcast and consume a romantic relationship from beginning to breakdown, and understand the reasons behind every step of the journey.
  • As a result, more people are understanding that not all relationships last forever—people change in ways that they cannot even predict. While people usually get married with the intent to stay married, there is no predicting how one’s thoughts, feelings and interests will change five, ten or twenty years down the line. Naturally, people who are even somewhat risk-averse will look to domestic contracts to help “soften the blow” of the unpredictable, so to speak.
  • Often, it’s not just the people within the relationship who will opt for a domestic contract; sometimes it’s the parents, grandparents or other relatives who will want a contract to be created. There are several possible explanations for this:
    • We are now seeing the largest intergenerational wealth transfer in history. Generations of parents and grandparents who are passing on wealth to their descendants have often been the creators of that wealth, and as a result feel very strongly about protecting that wealth from those “outside the family” for the sole benefit of those descendants.
    • In an increasingly inaccessible real estate market where many younger buyers require contributions from their parents just to meet down payment requirements, such parents will want to ensure that such contributions are returned to them upon a relationship breakdown.
    • Sometimes it may simply boil down to a lack of trust. Just because one is (or believes that they are) compatible with someone else, it does not mean that that someone else is compatible with the rest of the family. As mentioned above, the increased visibility of others’ failed relationships through social media may influence a relative to be extra cautious about protecting their loved one.

Issues surrounding domestic contracts are relevant in an estate planning perspective. For example, some clients don’t want their beneficiaries to receive assets from their estate unless such beneficiaries—if they are in a relationship—to enter into a domestic contract. In addition, many Ontario wills have language excluding gifts, income from any gifts, and assets into which such gifts or income can be traced, from any division of property under Ontario family law. So, if a domestic contract is sought, any ripple effects it may have on other aspects of a family’s wealth planning should be thoroughly examined.

I should emphasize that we never intend for a relationship breakdown occur, but inevitably it sometimes happens. Yes, domestic contracts aren’t exactly romantic, but perhaps I feel that people in my generation understand that sometimes romance must be sacrificed in exchange for reality. As a mentor of mine once said to me: “Hope for the best, prepare for the worst”.

About Demetre Vasilounis
Demetre is an associate in the Private Client Services group of Fasken’s Toronto office. He has a broad trusts and estates practice and has developed and implemented cohesive succession plans for clients involving a wide range of different family and corporate structures. He has also advised on a breadth of family wealth planning matters, including tax issues, estate freezes, cross-border and international estates, probate planning, disability planning, charitable gifting, asset protection strategies, personal privacy, intellectual property and domestic contracts. Demetre regularly speaks and writes about various legal issues in succession planning, including in particular the evolving area of digital assets in estate planning. His work has been cited by the Ontario Superior Court of Justice and he has spoken at both national and international events. Demetre has obtained the prestigious Trust and Estate Practitioner (TEP) designation from the Society of Trusts and Estates Practitioners (STEP). While Demetre assists many families with navigating these areas, he is also experienced in helping individual entrepreneurs and business owners, philanthropists, athletes, artists, authors, entertainers, social media influencers and various types of professionals.

1 Comment

  1. Rowena Griffiths

    April 8, 2022 - 1:45 pm

    Very interesting perspective and read…

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