Contemplating marriage or a common-law relationship?
The Supreme Court of Canada on December 19, 2002 in an 8-1 majority decision handed down their decision in Nova Scotia (Attorney General) v. Walsh [2002] S.C.J. The decision denies common-law couples the right to share property upon the breakup of the relationship which property sharing is enjoyed by married couples. The following quote from the case gives a concise sample of the Court's thinking on this most controversial subject.
The decision to marry, which requires the consent of each spouse, encapsulates within it the spouses' consent to be bound by the MPA (Provincial Legislation similar to that in Ontario) proprietary regime. Unmarried cohabitants, on the other hand, maintain their respective proprietary rights and interests throughout the duration of their relationship and at its end. If they so choose, however, they are able to access all of the benefits applicable to married couples under the MPA (Provincial Legislation similar to that in Ontario). They are free to marry, enter into domestic contracts, own property jointly or register as domestic partners (such registration not available in Ontario). There is thus no discriminatory denial of a benefit in this case because those who do not marry are free to take steps to deal with their personal property in such a way as to create an equal partnership between them.
The decision to live together is insufficiently indicative of an intention to contribute to and share in each other's assets and liabilities. While many unmarried cohabitants have agreed as between themselves to live as economic partners for the duration of their relationship, it does not necessarily follow that these same persons would agree to restrict their ability to deal with their own property during the relationship or to share in all of the other's assets and liabilities following the end of the relationship. People who marry can be said to freely accept mutual rights and obligations. A decision not to marry should be respected because it also stems from a conscious choice of the parties.
Even if the freedom to marry is sometimes illusory, it does not warrant setting aside an individual's freedom of choice and imposing on that individual a regime that was designed for persons who have made an unequivocal commitment encompassing the equal partnership described in the MPA (Provincial Legislation similar to that in Ontario). While inequities may exist in certain unmarried cohabiting relationships which may result in unfairness on relationship breakdown, there is no constitutional requirement that the state extend the protections of the MPA (Provincial Legislation similar to that in Ontario) to those persons. Alternative choices and remedies are available to persons unwilling or unable to marry.
You can read the entire decision here, but I ask you to call me to discuss how the decision impacts your common-law relationship whether you are contemplating or involved in a common-law relationship. Steps must be taken to protect your respective interests. Accordingly...
- What should I consider before Marriage?
- Marriage Contract (Pre-Nuptial)?
- Cohabitation Agreement?
- Marriage Contract and/or Cohabitation Insurance?
- Wills?
- Powers of Attorney?
- Life Insurance?
- Pension Plans & RRSPs?
- Protection of my Assets?
Marriage Contract
If your assets minus your debts is equal to that of your spouse-to-be, and neither of you already have children, either with each other or another partner, then maybe a marriage contract is not necessary. You cannot by a marriage contract affect the rights of children to be born in any way ie. custody, support or access. If there is a disparity in your net worth as described in this paragraph or in your net income or you or your spouse already have children, then you should consider a marriage contract. Remember that signing a marriage contract is like insurance. You simply ignore it and stick it in a drawer unless you are unfortunate enough to have your marriage end. A Marriage contract attempts to predetermine all issues of the separation without having to go to court.
Cohabitation Agreement
Similar considerations apply if you just plan to live together even though should this type of relationship end there is no need for divorce or division of net family property. (explained below) There is still a risk. Your common-law spouse could sue for a share of your assets claiming that you promised a share of them, or your spouse says he or she contributed to your business and is "entitled" to a share. A Cohabitation Agreement attempts to predetermine all issues of the separation without having to go to court.
Wills
An existing Will becomes void upon marriage. Click here as to why you should have a Will.
Powers of Attorney
Clearly if you are entering into a marriage or a common-law relationship, you need Powers of Attorney for both Property and Personal Care. Your spouse is your first line of defence should you become ill and by naming your spouse as your power of attorney you give your spouse the ability to for care for you during your incapacity. Click here as to why you should have a Power of Attorney.
Life Insurance
This may be the easiest way to leave specific amounts of money to children of previous relationships. If the child or children are named beneficiaries then upon your death the money passes without the need to "probate" or even have a Will and passes tax free.
Pensions and RRSPs
The above comments as to life insurance also apply to naming a beneficiary in your RRSP or Pension Plan but taxes may be payable.
Protection of Assets
One of the clear benefits of a marriage contract is to agree that what is yours is yours and what is hers is hers. At worst a marriage contract at least results in delineation of your assets. In Ontario upon separation you divide your Net Family Property unless you have a marriage contract. The division of Net Family Property is complicated and should be reviewed with your family law lawyer but briefly can be described as working as follows.
Each spouse determines their pre-marriage gross assets minus gross debts. This is easy if it has been set out in your marriage contract. Then from the date of marriage to separation each party calculates their post marriage assets minus their debts. From that figure each party deducts their pre-marriage net asset figure as described in this paragraph. Whoever then has the higher number pays to the one with the lesser number one half the difference.
Certainly, being prepared with a marriage contract or cohabitation agreement is the best piece of "insurance" you can buy.
For further information on this subject I refer you to the following article on these issues which you may access by clicking on this link: Common-law Relationships - Are They That Different From A Traditional Marriage?
January 2003