The two most common misconceptions we hear from clients on this topic are either:
- That family law is the same whether you are married or common law partners; or
- That there are no rights or obligations that arise from being common law unless you decide to get married.
As a result of these misconceptions, many couples who decide to move in together or get married do not explore the option of a cohabitation agreement or a marriage contract. These documents are otherwise known more casually as “prenups”.
In many cases, upon separation, we hear from clients that the thought crossed their mind, but they either felt “it will never happen to us” or “it was too uncomfortable to discuss”.
A cohabitation agreement or marriage contract is much like a car insurance policy in that you hope to never have to use it but there is comfort in knowing it is there and exposure to financial risks when it is not. In many ways, the investment in a cohabitation agreement/marriage contract may be a fraction of the cost to reach a resolution without one.
We have decided to address this topic in three parts. In this article, we will introduce you to the importance of cohabitation agreements and marriage contracts. In the second article, we will discuss the differences in the law between married and common law spouses to further highlight the importance of these contracts. Finally, in the third part, we will review the process to create a marriage contract or cohabitation agreement.
Increasing number of people who live as common law spouses
The topic of cohabitation agreements and marriage contracts is becoming increasingly popular as the number of individuals electing to live as common law spouses increases each year. According to Statistics Canada:
- Of the 19.9 million people aged 25 to 64 in Canada in 2017, the majority were married (56%) or living common law (15%); and
- Many adults now choose to live common law before marriage. According to the 2017 GSS, 39% of married 25 to 64 year olds lived common law with their current spouse before tying the knot. This was up from 25% in 2006. Those who had lived common law with their spouse had done so for an average of 3.6 years prior to marrying, up from 2.5 years in 2006.
The law differentiates between married and common law partners
The law on parenting and support is similar whether you are married or not. However, there is a significant difference in how property is divided. In Ontario, there is an automatic right to division of property in accordance with the Family Law Act for married spouses unless you have “opted out” by way of a marriage contract. If you are cohabiting but not married, there is no automatic right to division of property, unless you “opted in” by way of a cohabitation agreement, or an exception in the law applies to you. Married and unmarried spouses may bring a trust claim against the other spouse’s property. These claims are complex and expensive. Trust claims may be excluded in a cohabitation agreement or marriage contract.
Examples of when a cohabitation agreement or marriage contract can be helpful
Here are some of the most common reasons our clients come to us for a cohabitation agreement or marriage contract:
- When you are purchasing real estate together and want to agree in advance on how the equity of the home will be shared, especially if one of you will be contributing more than the other;
- You are moving into a home that is owned by one of you and want to agree in advance whether any equity will be shared;
- If you wish to set out how expenses will be managed while you live together;
- If one or both of you own your own investment properties or properties with other people;
- If you have received, or expect to receive an inheritance or gift that you plan to contribute towards a shared asset;
- If one or both of you wish to protect investments, savings, business interests etc.;
- If one or both of you have significant personal debt; or
- If one or both of you earn significant income.
Stay tuned for Part 2 of this series where we will expand upon how the law applies to married and common law spouses upon separation.
This blog is intended as general information and not legal advice. Specific questions regarding your own circumstances should be addressed with a family lawyer.
Our mediators are experienced family lawyers and we are here to help. If you need assistance with a cohabitation agreement or marriage contract, or are in the process of separating from your spouse or considering separation, click here to schedule a free Zoom call with one of our mediators to learn more about our services and to answer any questions you may have about the process of mediation.