This blog has been written by Darren Lund, Partner, at Fasken LLP, Toronto
For estate planners, when a client tells us that they are moving to another province or country, a number of planning issues immediately come to mind.
What does the move mean for the client’s will and powers of attorney? How will the move impact an existing trust or corporate structure? And, of course, what are the tax consequences of moving to another jurisdiction?
There is another document that should be on that list: the client’s marriage contract.
As I have discussed in previous blogs, marriage contracts can be an important part of a client’s estate plan. They may protect family wealth intended to pass to the next generation or preserve the integrity of an estate plan in a blended family where the spouses have different intended beneficiaries, to note just two examples. The effectiveness of the marriage contract may therefore be integral to whether the broader estate plan works as intended.
With clients increasingly mobile, an agreement negotiated in one jurisdiction may ultimately have to operate in another. An interesting way to appreciate the potential consequences of moving to a new jurisdiction with an existing marriage contract is by considering the situation in reverse. What happens when spouses move to Ontario (my jurisdiction) with a marriage contract made elsewhere?
Will an Ontario Court Have Jurisdiction?
The first question is whether an Ontario court has jurisdiction over the dispute, should the spouses experience a relationship breakdown after arriving in Ontario.
For claims under the Ontario Family Law Act, where the statute does not itself provide the jurisdictional rule, Ontario courts apply the common law “real and substantial connection” test. In the family law context, if a party’s “real home” or ordinary residence is in Ontario, that is a presumptive connecting factor capable of establishing that connection.
That may not always be obvious following a recent move. A person can be ordinarily resident in more than one place, and spouses may for a period of time be living in different locations. Determining a party’s “real home” will depend on all of their circumstances. There may therefore be a period following a relocation when it is unclear whether an Ontario court would assume jurisdiction, adding complexity and cost to an already difficult circumstance.
What Happens to the Contract?
Assuming Ontario has jurisdiction, section 58 of the Family Law Act, which deals with domestic contracts made outside Ontario, becomes important.
Section 58 provides that the manner and formalities of making a domestic contract, as well as its essential validity and effect, are governed by the “proper law” of the contract. That might provide comfort to someone arriving in Ontario with a marriage contract expressly governed by the law of another jurisdiction, with which they are familiar.
But there is an important qualification. Even where the proper law of the contract is a foreign law, section 56 of the Family Law Act still applies.
Among other things, section 56(4) permits an Ontario court to set aside a domestic contract where a party failed to disclose significant assets, debts or liabilities, did not understand the nature or consequences of the contract, or where the contract may otherwise be set aside under the law of contract (e.g. duress, undue influence, mistake, etc.).
A potentially Unwelcome Surprise
Consider spouses who enter into a marriage contract in a jurisdiction with very different expectations concerning financial disclosure, which is not uncommon. The agreement may satisfy all local requirements when it is executed and expressly provide that it is governed by local law.
Years later, they move to Ontario. If their relationship subsequently breaks down here, they may discover that their choice of foreign law does not necessarily insulate the agreement from Ontario’s statutory protections for things like financial disclosure and independent legal advice, which could result in the contract being set aside in Ontario, in whole or in part.
For someone coming from a legal system with less onerous disclosure requirements, that may be a completely unexpected consequence of moving to Ontario.
Add the Marriage Contract to the Checklist
The practical takeaway is straightforward. When a client is contemplating a significant change of residence, the planning conversation should extend beyond wills, trusts, and tax. If the client has a marriage contract, it should be reviewed as well.
Ideally, that review takes place before the move, with advice from family law counsel in the destination jurisdiction. The existing agreement may be perfectly adequate, or it may need to be amended, supplemented or replaced.
Clients move provinces and countries for any number of reasons. Their marriage contracts move with them. Whether the legal protection they thought they had moves with them is a different question.
