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Tips for Common-Law Couples

More and more couples are choosing to live together, either as a precursor to marriage or in lieu of marriage.  The decision to live common-law brings with it financial consequences and there are various aspects of the relationship that should be carefully considered. 

Here are a few suggestions you may find helpful if you are living common-law:

  • Set goals upfront. You and your common-law partner each have your own financial objectives, resources and obligations. You should have a frank discussion about how you are going to achieve those goals together. This will help limit or prevent potentially painful financial consequences should your relationship come to an end.
  • Have the talk. As soon as you begin to live together, you should make it clear how much you expect to spend, to save and to invest. This means you should have a discussion about the management of your personal finances and determine who will be paying which bills and how the household expenditures will be shared.
  • Get it in writing. During those blissful beginnings, arrange to see a lawyer or notary and sign an agreement defining the terms of your relationship. This document, commonly known as a cohabitation or common-law contract, may save you a lot of trouble if you ever separate.  Attach to the agreement a list of each person’s assets and personal effects.
  • Plan ahead. Since a common-law partner is not recognized as a legal heir in case of death in some provinces, you may want to consider providing for your partner by signing a valid will.  In some provinces, a common-law partner does have rights to a division of property upon death, so in these cases, your concern may be providing for children of a previous marriage or relationship.  Given the continual changes in the law in this area, it is crucial that you speak with your legal and financial advisors on a regular basis to ensure that your estate plan is up to date.
  • Review your insurance and investment plans. Review your list of beneficiaries both with respect to your life insurance policies and your registered investment plans.
  • Decide on a Power of Attorney. While your faculties remain intact, you should sign a power of attorney to provide for the possibility of becoming mentally incompetent.
  • Do your homework. Since certain laws do recognize common-law spouses, you should seek information on the impact of such laws on your personal situation. Also, since tax laws also apply to common-law spouses, you should be aware of the implications of your relationship from a tax perspective.
  • Contributing to RRSPs. Since common-law spouses are recognized by tax legislation, you might wish to take advantage of income splitting opportunities by contributing to your spouse’s RRSP. However, you should be aware that the contributor may not be able to get these funds back in the event of separation, depending upon your province of residence.

For more information contact:
Ron Arnst
Investors Group
(204) 956-3364 

Teresa Pagnutti or McKenna Wild
Environics Communications
416-969-2721; 416-969-2774