07 Jun Do You Or Don’t You Want To Say I Do? The Rights Of Common Law Spouses Versus Married Spouses
Many clients are unaware how their marital status plays an important part in determining their rights once their relationship ends. To shed some light on this topic, we must establish that there are two types of relationships that engender financial consequences for both spouses. They are the married couple and the common law couple.
Common Law Couples
The couple must have:
- 3 years of continued cohabitation; or
- 1 year of continued cohabitation with a child being born of the relationship.
If you qualify as a common-law spouse, the Family Law Act provides for certain entitlements and relief to you. A common law spouse may expect the following:
- Spousal support: Commonly referred to as “alimony”, it is based on the length of the relationship and is meant to provide both spouses with the same lifestyle they enjoyed as a couple. The longer the relationship, the longer the length of the entitlement to support.
- Property: All property (including finances) is divided in accordance with ownership. In a sense, the law views the couple as business partners. You keep what you own and the other has no entitlement to any of your assets. There is a misconception in the public that common law spouses may be entitled to their spouse’s assets. This is a view that arises in too many situation.
For the common law couple, every financial decision should be made with the knowledge that you do not reap any benefit if the asset is not owned by you. Everyone must be mindful of the fact that there is no automatic right to share or equalize assets. Contributions made to your common law spouse’s property will be recognized as a gift in most cases, unless otherwise agreed upon in writing. To contest such a presumption will require strong evidence and it is not an easy battle.
Having gone through the ceremony of marriage, the couple immediately enjoy or, depending on the perspective, suffer the consequences imposed by the law. A married spouse may expect the following:
- Spousal support: Like the common law couple, the married couple will be entitled to spousal support but will not have to wait the 3 year term. The entitlement is immediate. Once again, the longer the relationship, the longer the length of the entitlement to support.
- Property: This is the big difference between common law and married spouses. The parties need to equalize their assets and debts. The assets you possess at the date of separation, commonly referred to as the date of valuation, will be reduced by the value of your total debt, at that date. From this amount, you deduct the net value (assets – debts) you owned at the date of marriage. The net value is referred to the parties’ Net Family Property. A comparison is made between both married spouses and the wealthier spouse pays half the difference to the other spouse. This is the equalization payment.
- Matrimonial home: The residence(s) the married spouses use may qualify as a matrimonial home. A matrimonial home plays an important part in the equalization calculation. Should you own a house at the date of the marriage and still own it at the date of separation, you may have a problem. A value that you have at the date of marriage may normally be used to reduce your Net Family Property, but a matrimonial home is the exception to that rule.
- Will: A right to contest the other’s will if they are not satisfied with the gift, if any, from the deceased spouse. Practically speaking, the surviving spouse would elect to request an equalization calculation, as though they were separating and using the date of death as the valuation date.
- Automatic inheritance: A surviving married spouse has an automatic right to a share in your estate and to become your executor should you have no will.
Information is power and knowing the consequences of your marital status will go a long way in understanding how to protect yourself and how decisions made will affect you and your personal wealth.
To avoid misunderstandings or confirm your agreement with the topics mentioned above, you may wish to enter into a cohabitation agreement or a marriage contract. It may worth both your while to decide things in advance and to avoid future fights or possibly litigation.
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