Common-Law Marriage: Part II – The Hidden Hazards of Property Division

Common-Law Marriage: Part II – The Hidden Hazards of Property Division

July 16, 2020

By Margaret Waddington

As discussed in Part I of this article, common-law couples to do not have all the same rights and obligations as legally married couples, and this difference is never larger then when dealing with the division of property upon separation.

Many common-law spouses believe that they will split all of the assets and debts accumulated during the relationship if they were to ever separate, but that is simply not the case.

Part I of the Family Law Act deals with the Equalization of family property and helps to ensure that one person does not benefit unfairly from the relationship over the other. But these laws ONLY apply to legally married couples. In 2011 the Supreme Court of Canada ruled in the case of Kerr v. Baranow that parties who choose not to get legally married knowingly accept these differences in property entitlements, and therefore this legal difference is not likely to change anytime soon.

Property division is still a complicated process to navigate for married couples with its own set of challenges but there is a formal structure in place to ensure that both parties share the financial benefits of the marriage. Whereas the baseline for common-law spouses is that they keep what is in their name with no entitlement to the other spouse’s assets.

This can be a real problem when one common-law spouse has control over the majority of the finances or is the sole breadwinner for the family.  For example, imagine a couple who has lived together for 20 years, raised 3 kids, and have been quite happy together. But only one spouse’s name is on title to the house, the car, and the retirement account. Upon separation the other spouse would be left with very little.

Or imagine two individuals who both are working and have made significant and expenses renovations to their family home. But they separate without getting married and only one common-law spouse owns the home. The other will have a very difficult task ahead of them trying to recoup any of their investment in that home.

As cold as these situations sound, the law does have some wiggle room that can help correct this imbalance of benefit when one party would otherwise be unfairly disadvantaged. Remedies like, joint family ventures, constructive trusts and unjust enrichment are just a few possibilities. However they can be expensive and time consuming to pursue whether you are in court or coming to a private arrangement. That is why it is so important for common-law spouses to carefully plan their finances with an awareness of what their rights are in a potential separation.

Unfortunately, the details of these alternative remedies stretch beyond what can adequately be covered in this article, but if you are dissolving a relationship, of any kind, you should seek advice from a lawyer before making any agreements to make sure you are aware of all your legal rights and obligations. Better yet, if you are beginning a common-law relationship a lawyer can help you draft a co-habitation agreement that may help with matters along the way and will structure the terms of any future separation that may occur.

If you have any questions regarding your separation, common-law relationship, or estate planning options please do not hesitate to contact our office and we will be happy to put you in touch with the right lawyer for your needs.