March 7, 2012 By: Pam MacEachern
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Many unmarried (common law) couples believe that after they have been living together for a certain period of time, they are treated the same as married couples. This is wrong.

It is true that, for many purposes, common law couples may be treated in a similar way as married couples. For example, this includes income tax filings and spousal coverage under a pension plan or health plan.

But for other purposes, and especially for matrimonial property sharing, common law spouses are on a very different footing than married spouses.

This brief article explains why common law spouses should consider entering into a cohabitation agreement in order to specifically agree on what rights and obligations will flow as a result of their relationship. This discussion applies to common law spouses in Ontario, where the matrimonial property sharing legislation specifically excludes common law couples from being entitled to seek an equalization of family property.

Family law legislation differs from province to province. Some provinces provide property sharing rights for common law spouses, and others do not. That is why a common law spouse needs to look at the law that applies to them in the province where they live. This article only applies to Ontario.

What are the key family law differences between being married and common law?

a. Property Sharing

Many common law couples believe that they have the same property sharing rights as married spouses. This is not the case.

In Ontario, only married spouses are entitled to claim an equalization of property accumulated during the marriage under the Ontario Family Law Act. This means that when a marriage ends, the married spouses share equally what they accumulated during the marriage, with some exceptions. The law assumes that both spouses contributed equally to the accumulation of wealth during the marriage, and the equal sharing provisions apply regardless of whether or not this was the case.

On the other hand, when common law spouses separate, they do not have a right to claim an equalization of property accumulated during the relationship. Common law couples cannot make this claim under the Ontario Family Law Act, no matter how long their relationship has lasted, no matter how many children they may have together, and no matter how “traditional” or “marriage-like” their relationship has been. Instead, the presumption for common law couples is that each spouse gets to keep property that they own at the end of the relationship with no automatic right to property sharing.

Common law couples can, however, acquire interests in each other's property under other legal doctrines, such as unjust enrichment. Unjust enrichment may apply where one spouse has accumulated assets through the contribution of the other spouse.

So while it is incorrect to state that common law couples have the same rights to share property as married couples, it is also incorrect to state that common law couples will never have a right to share in each other’s property.

A common law spouse may have a right to share in the other spouse’s property at separation, but this is not an automatic right like it is for married couples. A common law spouse must show that there has been an unjust enrichment, based on their contribution during the relationship. For married spouses, contribution does not matter, because the law assumes it exists.

Also, even if a common law spouse establishes that there has been an unjust enrichment, they are only entitled to compensation for that enrichment. It is not an automatic right to an equal sharing of family property, like married spouses have. The amount of compensation will vary from case to case, depending on the particular circumstances of the relationship, taking into consideration how assets were accumulated, how each spouse contributed to the relationship and what each spouse gave up in order to make that contribution.

Common law spouses should consider entering into a cohabitation agreement that specifically provides whether they have any property sharing rights between them. Such an agreement can specifically provide that the parties will share property in the same way that married couples would, or alternatively, that there won’t be any property sharing between them, regardless of whether one party contributes to their other’s assets or not.

b. Spousal Support

Both common law and married couples in Ontario have spousal support obligations towards each other. The difference is that common law spouses only have a spousal support obligation to each other after they have been cohabitating for a period of at least three years or if they have a child together.

For example, if a marriage breaks up after one year, the higher income earning spouse may have an obligation to pay the other spouse some spousal support, probably for a short period of time, depending on need and their respective roles during the marriage. But if an unmarried couple breaks up after one year, neither spouse is entitled to spousal support from the other, regardless of need or what they did for each other during the time they cohabitated.

For example, if you have been together for less than three years and don’t have children, before you give up your job to move to a new city for your spouse’s career, you better make sure you are either married, financially independent, or have a cohabitation agreement that establishes your right to spousal support. Without these, you will have given up your job but you won’t be entitled to any spousal support if you break up after you move, but before the three year mark (or having a child) that would entitle you to such support.

Likewise, if you are not married but have been together for more than three years or have a child together, you need to understand that you may be financially responsible if your spouse quits their job or becomes dependent, in whole or in part, on your financial support. Again, you may want to have a cohabitation agreement that specifically provides what, if any, spousal support obligation you may have to each other.

c. Dying without a Will

Another important difference between married and unmarried spouses in Ontario is that only married spouses have a right to share in the estate of their spouse if their spouse dies without a will. This is called intestate succession, where the law specifically provides for how an estate will be divided between family members if someone dies without a will. It does not matter what the deceased would have wanted – the estate is divided based on the lines of succession set out by the legislation.

Common law couples are not included in intestate succession rights, no matter how long their relationship has lasted, no matter how many children they may have together, and no matter how “traditional” or “marriage-like” their relationship has been.

Common law spouses can ensure that their spouse receives part or all of their estate on death by having a valid will that provides for this. A common law spouse will only be excluded from sharing in the estate if their spouse dies without a valid will that makes provision for them. This is why it is very important for common law spouses to ensure that they have an up to date and valid will in place.

Can a cohabitation agreement change this?

In Ontario, the law allows unmarried and married spouses to enter into contracts that specifically provide for what rights and obligations they will have as a result of their relationship. These agreements are called “cohabitation agreements”, if the parties do not marry, and “marriage contracts” if the parties do marry. A cohabitation agreement can turn into a marriage contract, and continue to be valid, if the parties marry at some point in the future.

Cohabitation agreements, and marriage contracts, allow couples to be bound by their own agreement on whether they will have any rights to share in the other’s property, any support obligations to each other, or any entitlement to share in the other’s estate on death. These agreements allow couples to “contract out” of the rights and obligations that the law would otherwise impose between them.

For common law couples, cohabitation agreements ensure that both spouses have discussed and agreed on what will happen to their property if they separate, and what it may mean if one of them contributes to the other’s property. Will it be considered a gift or will it give the other spouse a right to share property? This can avoid the messy disputes that may otherwise arise on separation, if one spouse believes they have not gotten a fair share of the assets accumulated during the relationship.

For example, if common law couples intend to be completely financially separate, so that each will be solely responsible for their own financial support and they will not share in each other’s property, they should enter into a cohabitation agreement that provides for this. And during their relationship, they need to ensure that the decisions they make about children, career, retirement, purchasing property, spending and saving, reflect this agreement.

If, on the other hand, a common law couple operates in a financially interdependent manner, perhaps because they have children or for other reasons, they should enter into a cohabitation agreement that provides for how they will share property that accumulates in one spouse’s name because, for example, the other spouse has assumed more of the child rearing or housework responsibilities. And, again, during their relationship, they need to ensure that the decisions they make about children, career, retirement, purchasing property, spending and saving, reflect this agreement.

When should a cohabitation agreement be signed?

The best advice for unmarried couples is that they should enter into cohabitation agreements at the beginning of their relationship, before they start to live together. Although a cohabitation agreement can be entered into at any point during the relationship, as the relationship progresses, it will be harder and harder to put such agreements in place, especially if the spouses have different understandings and expectations of their financial relationship. It is better to have these discussions at the beginning, and ensure that both parties enter into and continue in the relationship with the same understanding of how they will share finances.

When you do agree on how you will share finances, you and your spouse need to incorporate these terms into a cohabitation agreement, prepared by a lawyer, to ensure that the terms of your agreement are clear between you, are understood by both of you, are fair to both of you, and are clearly documented. Again, the best time to confirm your agreement is at the beginning of your relationship, when you agree. If you wait until you are separated, there is a significant risk that you and your spouse will have a different understanding of what is fair between you.

Do cohabitation agreements need to be prepared by a lawyer?

It is very important that cohabitation agreements be prepared by a qualified family law lawyer in order to ensure that they say what the spouses intend them to say. This is a complicated area, and it is difficult for non-lawyers to draft a cohabitation agreement that has the same legal effect as the parties actually intend. For this reason, cohabitation agreements that are not prepared by lawyers are easily set aside by the court if, at some point in the future, one of the spouses argues that they did not understand the agreement.

For this reason, in order to best ensure that the cohabitation agreement will be binding on the spouses, in addition to having the agreement prepared by a lawyer, it is also important that each spouse receives independent legal advice from their own family law lawyer before they sign the agreement.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Family Law