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This is the sixth of a series of blog posts I’m writing about prenups or prenuptial agreements for Ontario. In the first blog, I discussed what they are, when are they used, and what is required for them to be valid and enforceable. In this blog, I’ll discuss how they can be challenged. In the second blog, I reviewed Loy v. Loy – a Ontario Superior Court of Justice case which reviewed the jurisprudence concerning how prenuptial agreements (and other domestic contracts) can be challenged. In the third blog, I’m discussed some tips that will help mitigate against future challenges to prenups. In the fourth blog, I talked about about what happens if a prenup is set aside (in other words, what will govern the division of property, spousal support, etc.)? I also discussed the doctrines of UNJUST ENRICHMENT, CONSTRUCTIVE TRUST, and RESULTING TRUST – which can be used by a party to claim to assert property claims. In the fifth blog, discussed ownership and division of property can be dealt with in a prenuptial agreement template. In this blog, I’m going to focus on the idea of requiring a spouse to release your estate from claims through your prenuptial agreement.
So in a certain section of the prenup, the idea is that the parties agree not to make claims against the other party’s estate when they die. This provision may become relevant in the case of intestacy (i.e. one of the parties dies without a will) or where a Will is involved. This provision may also become relevant where a party is a spouse under the Succession Law Reform Act and is asserting a claim as a dependent to proper support from the deceased spouse’s estate.
Worth mentioning is that the language of the release is of utmost importance. If a release is too general, it may not succeed in covering things which the parties may have intended. For example, in Dimma v. Algoma Steel Corp (1979), 98 D.L.R. (3d) 160, the Ontario High Court of Justice held that a general release in a separation agreement (a type of domestic contract, just like a Prenuptial Agreement) did not prevent a wife from getting her deceased husband’s pension benefits. The separation agreement between the husband and wife provided a release “from all claims and rights that (she) may have, had, or afterwards may acquire: (b) upon the death of the other, under the laws of any jurisdiction”. The Court held that this language only prevented the wife from claiming statutory rights, but not contractual rights, such as pension benefits, or the ability to dispose of assets under a Will.
Similarly, in Re Saylor (1984) 3 D.L.R. (4th) 434, the High Court of Justice held that a general release in a separation agreement did not prevent a wife from claiming that she was a dependent and entitled to support under the Succession Law Reform Act. In this case, the wife and husband’s separation agreement contained a general release which said that the parties accepted the terms of the agreement “in satisfaction of all claims and causes of action each now has … including … claims and causes of action for … possession of or title to property, and any other claims arising out of the marriage of the husband and the wife”. Now, after the husband died, new legislation (the Succession Law Reform Act) came into force. Under that legislation, a dependent of a deceased could apply to the court for proper support from the estate. The wife claimed entitlement to the matrimonial home, which she had previously transferred to her deceased husband as part of the separation agreement. The Court held that the general release did not prevent her from claiming a right to the matrimonial home. Among other things, the Court held that the language of the release was clear enough only to bar inter-vivos claims, BUT NOT CLAIMS AGAINST ESTATES!
The lessons to be learned from these cases (and others) is that you must be as precise and comprehensive as possible if you wish to prevent a party to a Prenuptial Agreement from making claims at common law, statute, equity, trust, or in contract.