Financially Speaking

It’s happening more and more, these days: Couples choosing to live together before, or instead of, getting married. But living common-law has its own unique set of financial consequences that need to be carefully considered.

Here are a few tips for making the relationship work, financially:

• Goal-set from the get-go You and your partner each have personal financial objectives, resources and obligations – get them on the table in a frank discussion about how you are going to achieve those goals as a couple. That way, you’ll limit or prevent potentially painful financial consequences should your relationship one day end.
• Live together, talk together Be clear about how much you expect to spend, save and invest. Discuss the management of your personal finances and determine who will pay which bills and how you’ll share household expenditures.
• Write it down Early on, see your lawyer and sign an agreement, commonly known as a cohabitation or common-law contract that sets out the terms of your financial relationship.
• Will it to happen In some jurisdictions, upon your death, your common-law partner may have statutory rights to a division of “family property” or to “dependant’s relief”, and may also have rights under intestate succession rules if you die without a will. In those cases, you may want to include in your will provisions for children of a previous marriage/relationship. In other provinces, including Québec, a common-law partner is not recognized as a legal heir – so you may want to provide for your partner by signing a valid will. Given the continual changes in the law in this area, you need to speak with your legal and financial advisors regularly and keep your estate plan up to date.
• Know the law Certain laws recognize common-law spouses. Seek information from your legal advisor on the impact these laws might have on your personal situation in your jurisdiction. Know too, that tax laws apply to common-law partners so be aware of the effect of your relationship from a tax perspective.
• RRSP it You and your partner can take advantage of income-splitting opportunities by contributing to your partner’s spousal RRSP – but be aware that the contributor may not be able to get these funds back should you separate (depending on your province or territory of residence).
• Plan for it Get your relationship on solid financial ground that fits with your life plans by meeting with your professional legal and financial advisors as soon as possible.