Common law relationships have become more popular in recent years, especially as Canadians leave previous marriages and don’t feel comfortable committing to a new marriage. Statistics Canada reported that in 2016, over one-fifth of couples were in common law relationships. This is more than three times the amount of common law relationships in 1981.
Despite its popularity, many people mistakenly assume that common law relationships and marriages are essentially the same, minus the big wedding. Yet, there are key differences—especially regarding finances.
Common Law and Marriage – What’s the Difference?
The biggest difference between marriages and common law relationships is that marriages are legally recognized by the local government. Common law relationships only need to have two people living together for a certain number of years. (This may vary by province.) If the relationship ends, issues like child custody are handled in a similar way regardless of the relationship status. But when it comes to financial assets, including property accumulated during the relationship, the rules are quite different.
“For a married couple, everything they accumulate during the marriage gets divided between them upon separation,” says Family Law specialist Stephen Eaton of Toronto-based Eaton Law. “That same privilege does not apply to common law couples no matter how long they’ve been together.” Eaton further warned that if the asset, like a house, is not under your name, it will go to your significant other regardless who was paying the mortgage or who was paying the utilities at the time.
Financial Pitfalls to Avoid
The biggest pitfall is partners don’t realize they need to document their claim on an asset in a relationship. In a separation, the asset would leave the relationship with the partner who holds title over it. And, should your partner unexpectedly pass away without a will, the asset would go to your partner’s children (assuming they exist), or to the next immediate family. In Canada, if there are no surviving family members, the asset would go to the Crown.
Another potential problem if either partner in the common law relationship came from a previous marriage where the ex-partner has a claim to an asset. This could result in a court dispute and potentially complex legal situation if the common law partner lays claim to it.
Common Sense in a Common Law Relationship
According to Eaton, it’s important to have assets under your name or jointly held between the two. “Don’t agree to put the house under one person’s name if you’re common law,” Eaton advises. “Make sure you’re on title or make sure there are joint bank accounts or be okay that bank accounts that are not held jointly are not going to go to you and your heirs if your partner passes away.”
Ruby Leong, a lawyer with Markham-based RL Family Law, stresses the importance of keeping documentation throughout the relationship. “It’s hard to trace the evidence ten years later, so be clear, be organized, have a chart and spreadsheet that shows ‘I paid what and you paid what’.” Even if you didn’t contribute to the mortgage, you can still strengthen your argument in court by showing payments on maintenance, utilities, repairs, cable, etc., so keep receipts.
It’s important for women in common law relationships to protect their assets and to know what entitlements they may have. Even if the relationship is strong, unforeseen circumstances do arise. Having a consultation with a legal expert can help you be aware of any financial risks in the relationship. “Seeking financial advice and being educated is your first defense,” advises Leong. It’s up to each of us to be aware and stay safe.