You’re in love. Nowadays there are 2 big questions to pop. 1. The age old: Will you marry me? And the newer “Want to move in together”.
Both questions have huge financial implications.
Moving In Together
So, you and your partner have decided to move in together. This is the start of a beautiful common-law relationship. This is a big deal. With new legislation, if you and your partner are legally considered a common law marriage, in the event of a break-up, you may be entitled to or have to pay spousal or child support payments. Yes, even without the vows, common law relationships have financial implications.
Keep in mind, some of these rules change depending on what province you live in, so please check with local advisors to confirm the rules.
There are a lot of misconceptions regarding common law relationships, and I’m going to debunk the 3 biggest myths today.
Myth 1: You are considered legally “common-law” after 1 year of living together.
False. In Canada, this is only true for tax purposes. After living together for a year, you should be claiming taxes together as a household, but that’s it. To be considered a legal common-law marriage and qualify to benefit from any financial support provisions if you break up, you need to be common law for 2-3 years depending on where you live. If you and your common-law partner broke up after 1 year of cohabitating, neither partner would be on the hook to pay anything to anyone.
Myth 2: You are responsible for debt if you share a bank account or move in together.
False. In Canada, married or common law, if you didn’t co-sign on a loan with your partner, it’s their debt, not yours. You are not responsible for paying back their debt.
Myth 3: Breaks ups are the same as Divorces.
False: Break-Ups may feel like a divorce, but financially and legally, they are very different. In a common law relationship, the property of each spouse is treated 100% separately. What is purchased by each partner, bank accounts, investments, even your house, belongs to the person that bought them. In a breakup, there is no legal requirement for assets to be split or shared. This is the biggest difference between a breakup and a divorce and one of the most important things to know for your own financial protection.
COMMON EXAMPLE: Let’s say you move into your partner’s house. They had the down payment and their name is on the deed. Even if you paid a portion of the mortgage and bills for 10 years, if you broke up, there is no legal requirement for your partner to pay you back or give you your fair share of that house, even though you’ve contributed. However, if you’ve lived together for over three years, you could take legal action and try to get a portion of money paid back to you as an equitable relief claim.
On the flip side, if you own the house, having someone move in with you for more than 3 years doesn’t legally bind you to pay them money if you break up, however, they are entitled to take legal action to try to get you to pay them a portion of the money they have contributed.
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