As our society has shifted and changed, more and more people are embracing common-law relationships. While embodying many of the commitments of a legally recognized marriage, a common-law relationship carries with it a distinct set of legalities, especially when it pertains to financial and asset considerations.
As couples in common-law relationships build lives together, intertwining finances, purchasing property, and perhaps raising children, a significant query often surfaces: how is property divided if the relationship dissolves? This question carries both legal weight and emotional depth, so it’s essential to fully understand it.
Let’s talk about the specifics of property division for common-law couples in a bid to offer clarity and guidance.
Defining Common-Law Relationships
A common-law relationship is characterized by two individuals cohabitating in a relationship similar to marriage but without the formal legal recognition of marriage. Each province in Canada has distinct criteria for what constitutes a common-law relationship, typically centered around the duration of cohabitation and other contextual factors.
Mechanisms of Property Division
Unlike the framework provided for legally married couples, common-law couples do not automatically have rights to an equitable division of property. Here are the critical points to consider:
1. Individual Assets
Assets brought into the relationship by each partner typically remain with the original owner. For instance, pre-existing real estate or financial assets are retained by the respective partner.
2. Assets Acquired During Cohabitation
Properties procured during the relationship, if jointly acquired, may necessitate division based on each partner’s contribution. The distribution will depend on factors like financial input and maintenance responsibilities.
3. Inheritances and Gifts
Assets acquired through inheritance or as gifts during the relationship remain the sole property of the recipient unless there’s a clear indication of intended shared ownership.
4. Liabilities
Individual debts remain the responsibility of the partner who incurred them. Individual debts are those that were taken on by one partner, usually before the relationship began or for personal reasons not connected to the partnership. For example, if one partner took out a credit card solely in their name and racked up expenses, they alone are accountable for repaying that debt, regardless of the relationship’s status.
Joint liabilities, on the other hand, such as jointly-acquired loans, necessitate shared responsibility. This often happens when a couple decides to take out a loan for a shared purpose, like buying a home or a car. In these cases, both partners are equally bound to the obligation of repaying the loan.
5. Residential Property
The primary residence, often the most significant asset, may lead to disputes. In many provinces, ownership of the family home is determined by the title. However, claims can arise based on contributions made towards the home or its upkeep.
Unjust Enrichment: A Legal Remedy
In situations where one partner believes they have disproportionately contributed to the relationship’s financial well-being without adequate compensation, the principle of unjust enrichment can be invoked.
Unjust enrichment happens when one partner feels they’ve given more to the relationship’s financial health without receiving proper compensation or acknowledgment. Essentially, it suggests that one party has gained benefits they shouldn’t have, leaving the other party feeling short-changed.
Cohabitation Agreements: A Precautionary Measure
While couples enter relationships with the best of intentions and hopes, it’s prudent to prepare for unforeseen events. Similar to how married couples might draft prenuptial agreements to set clear expectations and boundaries, cohabitation agreements serve a parallel purpose for common-law couples.
But what exactly does a cohabitation agreement cover? At its core, it’s a blueprint for financial clarity. It maps out who owns what – from properties and cars to shared bank accounts and even pets. Should the relationship, unfortunately, come to an end, this agreement becomes a guiding document that clarifies how assets (and even debts) will be divided.
These agreements often include a wide array of financial protocols, like how household expenses are shared, how future assets will be accrued, or provisions for spousal support. This level of detail can reduce potential conflict zones and make the process of separation, should it happen, more structured and less emotionally taxing.
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