Kara Sears
In Canada, common-law relationships are recognized but do not have the same rights as traditional marriages. Each province and territory has different criteria for recognizing common-law relationships, which can affect separations, inheritance rights, and more. For example, in most provinces, common-law relationships are recognized after 1 to 3 years of continuous cohabitation or if the couple has a child together. It is important to understand the legal rights and privileges of common-law partnerships, as they can impact tax returns and government benefits. For instance, common-law partners may be able to claim tax credits for dependents and home-buying, but they may no longer be eligible for certain other tax credits. Additionally, common-law partners may have a basis to claim a share of property, even if they are not on the title, if they can prove their financial contribution. To protect themselves and their partners, common-law couples can create a cohabitation agreement detailing shared property and asset division.
| Characteristics | Values |
|---|---|
| Common-law recognition criteria | Continuous cohabitation for 1-3 years or having a child together |
| Common-law property claims | Possible if financial contribution to the property can be proven |
| Common-law inheritance | Depends on the will and the province; common-law spouses are not treated the same as legally-married spouses |
| Common-law separation | No legal process; involves separating, stopping cohabitation, and annulling the cohabitation agreement |
| Common-law spousal support | Allowed during separation except in Quebec |
| Common-law tax implications | May gain tax credits, transfer tax credits to a spouse, and claim certain amounts; may no longer be eligible for specific tax credits |
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What You'll Learn
Common-law property claims
In Canada, common-law relationships are recognised but do not have the same rights as traditional marriages. The rights of common-law couples vary across provinces and territories, impacting legal rights such as inheritance, spousal support, and property division.
When it comes to property claims, a common-law partner may have a basis to claim a share of the property, even if they are not on the title. They must prove their financial contribution to the property, which often involves going to court to establish a claim for unjust enrichment to gain compensation from their ex. For example, if a couple bought a home while single and then entered into a common-law relationship, with only one partner's name on the property, the other partner may contribute to utilities, renovations, and the mortgage. In this case, the contributing partner may claim rights to a share of the property's value if the relationship ends. These claims can be challenging to prove and may result in a lengthy and costly court process.
To protect themselves, couples can create a Cohabitation Agreement, outlining shared property and asset division. This provides more control over the terms of a split and helps avoid emotional disputes during a break-up. Most jurisdictions allow common-law partners to apply for spousal support during separation, except for Quebec, where the Civil Code does not automatically recognise this obligation.
To prove a common-law relationship, various documents can be used, including shared ownership of residential property, joint leases or rental agreements, bills for shared utility accounts, and important documents showing the same address, such as driver's licenses and insurance policies.
It is important to note that the recognition of common-law relationships and the associated property claims vary across Canada's provinces and territories. While most provinces recognise common-law relationships after 1 to 3 years of continuous cohabitation or having a child together, each province has unique criteria. Therefore, it is essential to understand the specific laws and requirements of the province in which the common-law relationship is established.
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Common-law and inheritance
Inheritance laws in Canada vary across provinces, and common-law partners do not have equal rights to traditional marriages. In the case of intestate (dying without a will), common-law spouses are not treated the same as legally married spouses in most places in Canada. Legally married spouses have automatic rights to their deceased spouse's property, whereas common-law spouses do not have automatic rights to inheritance or property through an equalization payment.
In some provinces, common-law partners may have a basis to claim a share of the property, even if they are are not on the title, if they can prove their financial contribution to the property. This typically involves going to court to establish a claim for unjust enrichment to gain compensation. This claim can be remedied by the court in two ways: a constructive trust awards property equal to the surviving spouse's contribution, and quantum meruit is a monetary award based on the promise of a future award from the spouse who died.
In Ontario, the Succession Law Reform Act (SLRA) governs who the beneficiary is when a person dies without a will. The SLRA defines a "spouse" as couples who cohabited for at least three years or couples in a relationship with some permanence and have a child together. While a common-law spouse may not have property rights to their spouse's property, they can make a claim against the estate if they contributed to the home or provided services without compensation from the other spouse.
To ensure a common-law spouse is protected in the event of death, it is best to create a will naming them as a beneficiary. A cohabitation agreement can also be created to detail shared property and asset division, which can help avoid disputes when dividing property during a breakup.
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Common-law tax implications
The Canada Revenue Agency (CRA) treats common-law couples differently from married couples for tax purposes. While common-law relationships offer a strong alternative to marriage, understanding how the CRA treats them for tax filing purposes is crucial.
The CRA defines a common-law relationship as when two individuals live together in a conjugal relationship and have lived together for at least 12 consecutive months, including any period of separation of less than 90 days. If the couple has a child together, they are considered common-law partners for tax filing, regardless of the cohabitation duration.
If you are in a common-law relationship, you must file your taxes as such. Each partner must file their tax return separately with the CRA, but they are considered a couple for tax purposes. This means that their combined household income will be used to determine eligibility for government benefits and tax credits.
There are several advantages to filing taxes as a common-law couple. These include:
- Income splitting: reducing the overall tax burden by splitting income between spouses.
- Combined deductions and credits: maximizing tax savings by combining or transferring credits like spousal amount, medical expenses, and charitable donations.
- Canada Child Benefit (CCB): potentially increasing benefits based on combined income, especially if one spouse has low or no income.
- Home Buyer's Tax Credit: available if one or both spouses have purchased their first home in the tax year.
However, there are also some disadvantages to filing as a common-law couple. You may no longer be eligible for certain tax credits, such as the GST/HST credit, Canada Child Benefit, Guaranteed Income Supplement, and Working Income Tax Benefit. You will also only be able to claim one exemption from capital gains on your primary residence.
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Common-law cohabitation agreements
Common-law relationships are recognized across Canada, but the rights of common-law couples are not always equal to those of married couples. The rights and requirements of common-law couples vary by province and territory, impacting legal rights like inheritance, spousal support, and property division.
To ensure that the rights of common-law partners are recognized before the law, it is important to create a cohabitation agreement. A cohabitation agreement is a written document that you and your common-law partner can make before or while you are living together. It is a type of domestic contract that outlines how you will deal with issues while you are together or at the end of your relationship. For example, a cohabitation agreement can outline how you and your partner will divide your property and debts if you separate.
Cohabitation agreements can also make it easier to manage the unexpected, such as tax implications. For instance, if one of you is not working, the other spouse can gain tax credits by claiming the non-working spouse as a dependent. However, there may be disadvantages to filing taxes as a common-law partnership, such as no longer being eligible for certain tax credits.
To create a cohabitation agreement, it is recommended to discuss what legal issues you want to include in the agreement, talk to a lawyer, make the agreement, sign it, and change or cancel it if needed. It is important to note that the laws governing common-law partnerships fall under provincial and territorial jurisdiction in Canada, so there may be legal differences depending on where you live. Consulting a lawyer can help you understand the specific requirements and protections available to you as a common-law couple in your province or territory.
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Common-law spousal support
In most provinces and territories, a common-law partner may be eligible for spousal support from the other partner. This may depend on how long the couple lived together before they separated. For example, in some provinces, a couple must live together for two or three years before either partner is eligible for spousal support. The only exception is Quebec, where the Civil Code does not automatically recognise the obligation to provide spousal support.
To receive spousal support, common-law couples must meet certain requirements. These include demonstrating at least one of three requirements to establish entitlement:
- Having responsibilities during the relationship that prevented you from building a career, thus suffering an economic loss.
- The separation left you in need of financial support, and the other spouse has the means to provide it.
- The judge must also consider whether spousal support would compensate the spouse with the lower income for sacrificing power to earn income during the marriage, compensate the spouse with the lower income for ongoing care of children, or help a spouse in financial need if the other spouse can pay.
The amount of spousal support will be determined either in a separation agreement or by a judge. The first method requires both partners to agree on the amount and terms of separation. If this is not possible, a judge will review the proof of entitlement and determine the amount and period of payment.
It is important to note that common-law partners may also have different tax implications, such as tax credits for dependents, the Home Buyer's Tax Credit, and the ability to transfer unused tax credits to their spouse. However, they may no longer be eligible for certain tax credits, such as the GST/HST credit and the Canada Child Benefit.
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Frequently asked questions
To be considered a common-law partnership in Canada, both partners must be 18 years or older, unmarried, and have lived together for at least 12 consecutive months. This applies to couples of the same or different genders.
To prove your common-law relationship, you will need to provide evidence of cohabitation and the duration of your relationship. This can include rental agreements, mortgage documents, utility bills, bank statements, or joint ownership of assets.
In Canada, common-law couples must file individual tax returns and cannot file jointly. However, they can share certain tax credits and split pension income to reduce their overall tax liability. It is important to report your common-law status accurately to avoid penalties.
The inheritance rights of a common-law spouse vary across different provinces in Canada. In some provinces, such as Ontario, there are no automatic inheritance rights, and your partner must name you in a will or as a beneficiary. In other provinces, such as Saskatchewan, common-law spouses may have a claim to the estate, but it is not guaranteed and may depend on the judge's discretion.
