Personal Finance

The rights and responsibilities of living together
By Gail Bebee | 14/03/13

As wedding season approaches, engaged couples are busy planning a blissful future together. While idealistic visions of married life may reign in the lead-up to their wedding, the betrothed would do well to inject a measure of realism into their planning and consider their matrimonial rights and responsibilities, what happens if the union fails, or if one of the partners dies.

About the Author
Gail Bebee is an independent personal finance speaker, teacher and the author of No Hype--The Straight Goods on Investing Your Money. She can be reached at gbebee@gailbebee.com; her website is www.gailbebee.com.

Couples who forego the wedding but decide to move in together should follow a similar path. Taking this route will provide each partner with a practical understanding of the laws applicable to marriage or cohabitation. The relationship should also benefit from each person gaining a better understanding of the other's point of view on important aspects of living together.

Canadians frequently have misconceptions about the legal rights and responsibilities of marriage or cohabitation, due to the pervasive influence of the law according to American TV shows and the fact that spousal rights and obligations depend on the laws in the province or territory where the spouses reside.

In general, provincial family law across the country stipulates that if a marriage ends, a couple shares equally in any property acquired during the marriage. Property means assets which could include the family home, a vacation property, non-registered savings and investments, tax-free savings accounts (TFSAs), RRSPs and pensions.

Under certain conditions, exceptions to this rule may exist for gifts or inheritances received during a marriage. Matrimonial law delineates clear rules for spousal support in the case of separation or divorce and entitles the surviving spouse to a share of their deceased partner's estate, even if there is no will.

The law regarding the rights and obligations of common-law relationships varies significantly by province. Unless there are specific legal provisions, each partner gets to keep the property they own when the relationship ends and each is responsible for their own debts. Alberta, Ontario, New Brunswick, Newfoundland and Labrador, Prince Edward Island and Yukon do not grant property-sharing rights to common-law partners.

British Columbia, Saskatchewan, the Northwest Territories and Nunavut extend such rights to unmarried spouses who have lived together for two years. In Manitoba and Nova Scotia, common-law couples who register their relationship (or in Manitoba live together for three years) have property-sharing rights.

 
"Living the contract is the most important part of the whole process," says Pam MacEachern.

Most provinces have provisions for spousal financial support if a common-law relationship fails after a specified minimum period of cohabitation or if the spouses have a child together. As decided by the Supreme Court of Canada in the widely reported Lola and Eric case, Quebec is the only province where common-law partners do not have the right to spousal support or property-sharing rights.

Estate law does not provide for a common-law partner to share in a spouse's estate if there is no will.

Given the intricacies of spousal relationship laws, couples who plan to marry or live together would be wise to consult a lawyer with expertise and experience in this area. Each partner should retain his/her own lawyer to ensure that the advice received is truly independent.

The lawyer will review the legal rights and obligations applicable to the contemplated relationship and discuss the client's personal situation and expectations. She will then outline the legal options available to meet the client's circumstances.

After each partner has received legal advice, the couple discusses their views and reaches an agreement on the entitlements and obligations of their relationship. This process could involve several rounds of negotiation and legal consultation.

Some couples are satisfied with the spousal obligations and protections provided by the law. Others decide to spell out the terms of their relationship in a marriage contract (also known as a prenuptial agreement) or a cohabitation agreement (contract). This is often the approach chosen when one or both partners have significant wealth, expect a large inheritance or are involved in a personal or family business, or there are children from a previous relationship.

The cost of the average legal consultation on marriage or cohabitation including preparation of a contract is about $2,000 to $3,000. The bill will be higher for clients who require an exceptional amount of legal advice.

For a small fee and the answers to a few questions, a couple can buy a ready-to-print and sign marriage contract or co-habitation agreement from a web-based legal-document service. Such couples are buying a piece of paper, and one that may not stand up in court. What they really need is expert legal advice on spousal relationships and how to ensure that future relationship-related decisions will produce the intended outcomes.

"Living the contract is the most important part of the whole process," according to Pam MacEachern, a family-law lawyer with expertise in the area of matrimonial and common-law relationships. "A couple should review their contract periodically, especially if there are changes which could impact the rights and obligations in the relationship."

For example, if one partner decides to stay home to raise a family, a marriage contract that excludes spousal support may need updating. Or, if a common-law couple marry, their cohabitation agreement automatically becomes a marriage contract, but the terms may no longer be appropriate.

Deciding on the rights and responsibilities of a co-habitation relationship upfront will improve communication between partners and provide for better relationship-related decision-making in the future.

Don’t miss out on communications from Morningstar Canada! Sign up for our specialised newsletters, get early notice of our events, and get access to exclusive promotional content. Manage your subscriptions here.
Video Reports
More...
Click here to view all