Wealth Planning for Common-Law Couples
Wealth solutions for common-law couples.
Common-law couples Facts & Figures:
The province of Quebec has HALF of all known common-law couples (conjoints de fait) in Canada. Roughly half of the Quebecer common-law couples have children. The status of these couples exist outside of Quebec’s legal framework which determines obligations and responsibilities, like, the division of family patrimony following a separation.
More and more women are choosing to common-law couple status despite the lack of protections they would have enjoyed from the legal framework of marriage.
Due to our society’s current levels of inequality between genders, women are more likely to result in being disadvantaged following a separation from a common-law spouse. However, men can also be at a disadvantage if they were to be the lesser-paid spouse in a common-law couple.
This inequality is not only tied to income, but also the amount of tasks related to childcare, which is often unpaid.
In 2001 Statistics Canada found that…
Women reported having part-time employment for childcare : 36.5%
Men reported having part-time employment for childcare: 3.4%
Similar trends can be found in other areas of unpaid work, like cooking, cleaning and caregiving to elderly members of the family.
Separation of Common-law couples:
What everyone needs to know.
Property:
As the law currently stands, there is no recognition of family patrimony for common-law couples.
The division of property and assets, instead, fall under the rules of undivided co-ownership. This means that both members must be listed as co-owners of a property.
Should a commonly used asset, like, a car have only one listed owner, then the other partner will NOT have claim to it after separation.
Support payments:
Common-law couples DO have a right to child support payments.
Common-law couples DO NOT have the right to demand support payments from an ex-spouse. However, it can be argued in court in the case of ‘unjust enrichment.’
Update: In March 2024, the current government of Quebec had stated their intentions to reform the legal framework of common-law spouses and parents.
Written Agreement Between Common-Law Couples:
An alternative to marriage
Two consenting adults can decide to have a contract written, outlining the division of property and any arrangements to care for children, or payments to be made.
This agreement can be tailored specifically to your situation and according to your shared values and concerns, that go beyond the simple separation of assets.
Example:
Melanie quit her job to move to another city with her common-law partner, Sebastian. Melanie and Sebastian sign a contract. The contract says that if they separate, Sebastian will pay Melanie $10,000 to make up for the income she lost by quitting her job to live with Sebastian.
Example:
Paul doesn’t want to get married. He is a successful businessman, and has a lot of property and investments. He has been living with his boyfriend Grant for five years. Grant’s income is not very high. Paul and Grant decide to sign a contract so that Grant can keep up a certain lifestyle if they separate. The contract says that Grant can spend the rest of his life in one of Paul’s houses and receive yearly support payments of $15,000 for the rest of his life, or until Grant moves in with someone else.
A contract can be verbal, but it is RECOMMENDED to be written and signed by both parties or by a lawyer or notary.
Succession: What happens if I die?
In case of premature death, a surviving common-law spouse will not automatically inherit anything according to law.
Therefore, a written will becomes important to protect the well-being of the surviving common-law spouse.
Another alternative, is directly naming a beneficiary in a life insurance policy. However, this will only determine the payout of a life insurance policy and not the inheritance of property and assets.
Remember: there is no legal definition of a common-law couple as they can even exist when they do not share a common residence or if one was still legally married to another spouse.
What is Probate:
When you pass away, your family member or designated Liquidator (Executor) must submit an application to the Quebec government to inform them of their duties to carry out the Estate Plan. In Quebec, the fee is a nominal, one-time payment of $65. However, the real costs will largely be in terms of time and legal fees required to carry out the Estate Plan.
In Quebec, a notarial will will help you avoid probate and the time delays associated with it.
What happens if one of us is medically incapacitated?
By default, a common-law spouse is not automatically granted the power to make decisions on your behalf.
A Mandate (unofficially known as a power of attorney in Quebec), is one way to prevent unnecessary conflicts in medical or financial decision-making while a loved one is medically incapacitated.
You can designate one or more mandataries. For example, one mandatary can be trusted to make medical decisions and another can be trusted to make decisions involving property or finances.
