Chapter 7: How Do Common Law Divorces Work?
Common law relationships are on the rise in Canada. It’s become popular for people to live together before marriage, and they sometimes choose common law instead of marriage. More and more, older couples have taken this route.
Typically, older common law couples are people who have been married, have children, and have experienced the passing of a spouse or have separated after many years of marriage.
They often hold substantial assets, which complicates things when they enter a new relationship and then decide to live together. Often, it’s their children who urge them to consult a lawyer and develop a cohabitation agreement. They are worried that mom or dad’s assets might have to be shared with the new common law partner. The couple will come in to negotiate a cohabitation agreement that will protect their assets should the common law partner pass away or the relationship fails.
Sometimes, the cohabitation agreement will stipulate that the other party has a claim to a certain percentage of the wealthier person’s assets after a certain period of time. For example, 20 percent of the assets will be included after they have been together for five years, and if they have been together for more than 7 years, it increases to 35 percent. If they have been together for more than 10 years, it’s 50 percent.
These agreements are more likely to be upheld by the court because they are seen as a compromise. It’s not one-sided because of the clear intention to proportionally share certain assets over time. It is also more likely to be upheld in court when compared to an agreement where someone keeps all of their assets and the other person gets nothing.
The agreement creates clarity and mutual understanding between partners with well-established properties and assets. They now know where they both stand, a situation that creates reassurance for both the couple and their adult children.
In the event of a death, a common law spouse does not have the same rights as a married spouse if their partner dies without a will. A married wife or husband has the automatic right to receive the first $200,000 of the assets of the deceased, plus a percentage in proportion to the number of children. This is not the case for the unmarried spouse.
If a person passes away without leaving a will and they have no husband or wife by marriage (common law spouses don’t count), the assets automatically go to their children. If there are no children, then the assets go to the next of kin, such as parents and siblings.
The only way for a common law spouse to receive a share of the estate would be to prove financial dependency on the deceased spouse. They can also prove they are worthy due to their contributions to the acquisition, preservation or maintenance of the asset (this is called a constructive trust claim) or by proving they had a “joint family venture” with the deceased. In this case, a share in the estate may be awarded at the discretion of the judge.
A judge’s order is difficult to obtain. Determining the rights in such a situation is significantly different between common law spouses and married spouses.
Though common law partners sometimes agree to name one another as the beneficiary in their wills, either party can change their will at any time without the other person’s consent or knowledge.
A cohabitation agreement is a good way to ensure rights and claims to an estate are secure, whether it is in a will or not. This would protect you upon separation and death.
If you do not have a cohabitation agreement, consider keeping track of receipts, as the division of property is based on ownership. If you retain the receipts to prove that you purchased the car or the piece of art, claiming that asset will be easier in the event of a separation or the death of your partner.