What Are Some Common Misconceptions about Money, Marriage and Common Law Divorces?

Couple discussing Misconceptions about Money in Common Law relationship

In our profession, we often meet people after they’ve made a life-changing decision. Often, the individual does not realize the legal implications of their actions.  In this blog, I will discuss the ‘what ifs’ and provide an outline of the ‘rules’ that go along with major life decisions.

What do I need to know before living common law?

The first, and most commonly misunderstood ‘rule’ regarding common law spouses is that property rights are automatic. This is false! In Ontario, common law spouses have no automatic property rights.  This differs drastically from married spouses.

For common law spouses, receiving a monetary reward from property is typically obtained through a trust claim.

What is a trust claim in a common law relationship?

A trust claim is a claim for an interest in property or for some money based on your contribution to the acquisition of the property either directly or indirectly. It is like saying “I may not have a legal right to a share of the home but I contributed to it so it would only be fair if I got some compensation for my contributions!” Sometimes, the court will agree and award you an interest in the home or some money to compensate you. Often these cases are complicated and difficult to predict the results.

Should we put both names on title to our home when we are common law?

Putting your names on title of the home is the easiest way to dictate who is entitled to what.  Having your name on a title preserves some rights to the property. If one person puts more into the home, you can protect this through a cohabitation agreement or title to home can prescribe your ownership interest in the property.

What happens if my name is not on title to our home?

There are many reasons why a name is not on title, even when an individual is involved in the purchase. Some reasons are bankruptcy, tax purposes or simply you were talked into leaving your name off title.  If your name is not on title, and you’ve contributed to the home since it’s purchase, you may have an interest in the property. It is not a simple math problem to determine your share of the home but starting with the money put in to it makes sense. This is one of those areas of the law where it is not black and white – just various shades of grey. It is a challenging issue to negotiate and even more difficult to predict how a judge would resolve it.

What happens if I move in my significant other and s/he already own the home?

Again, there are no automatic property rights for common law spouses.  If you have contributed to the home throughout your relationship, you may have a claim for some division of the equity in the home.  To determine what is reasonable and/or likely, speak to a family law lawyer.

Steps to Justice – We’re not married. What happens to my partner’s property if they die?

What happens if I had an inheritance during our marriage? Do I keep it?

If you receive an inheritance while you are married but later separate, you may be able to protect these monies or the value of the asset from being included in the equalization process.  It’s difficult to consider the worst case scenario when you are in a happy relationship. This is the job of a lawyer.

If you receive an inheritance and want to protect its value should you separate, here are some thing you must know.

  1. Do NOT put these monies into the matrimonial home.  Once these monies are put into the matrimonial home, (mortgage payments, renovations, etc) they are no longer protected.  They cannot be excluded from the equalization process.
  2. Keep the monies in a sole account.  Mixing an inheritance into joint funds can cause the monies, or half of the monies, to become unprotected.  Keep monies in an account in your sole name.
  3. Track where the monies go.  If you move monies into different accounts, keep track of where these monies are, and what funds they are mixed with. It is easier to track if an inheritance is not mixed with other funds.

What happens if I owned our home when we got married?

If you owned your home prior to marriage and you would like to protect your interest in the home, you will need a domestic contract.

Unlike other property, where only the increase in property value is shared between married couples, for the matrimonial home, any equity in the home prior to marriage cannot be deducted.  I know. It does not make sense and is not fair but it is the law.

This means, it is the full equity in the home at the date of separation that is included in determining the net family property of each party. In other words, you have to share all of the equity in the house with your spouse including the equity you had when you got married.

If you want to protect your interest in your home, you will need to come to an agreement about how this is done and be upfront about this desire. You will need a cohabitation agreement or marriage contract stating that you are not sharing the equity you brought into the marriage.

What happens if I brought large investments into my marriage?

Assets that are accumulated throughout the marriage are included in the division of property. The value of the property you entered into the marriage is considered a deduction so you just share in the increase in the value of your assets.

Remember: Evidence is the key to trying to prove any claim.  Keep paperwork and bank statements to demonstrate or support your claims.

The information above is a general guideline and is not meant to act as legal advice.  For advice tailored to suit your individual needs, please contact our office.

Shannon More

Shannon provides client-focused, professional legal advice to her clients. She is dedicated to continued education and finding the most effective solutions to family law matters. Shannon is trained in collaborative practice and is in the process of becoming an accredited mediator.

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