A life partner adds a lot of value to our lives. Many Canadians are looking for that perfect someone and when they find them, you may want to celebrate your love by moving in together or getting married. However, marriage isn’t just about celebrating your love, it’s also a legal contract that involves the Canadian government and your finances (we know — this part isn’t very romantic!) This isn’t to say you shouldn’t get married, but you should have financial conversations with your partner before tying the knot to ensure you’re aligned. In some cases, you may find that common law is actually a better fit for you and your partner due to the differing financial and legal implications. To learn more about common law vs marriage in Canada, continue reading this guide.
Table of contents
- Common Law vs Marriage Canada
- Financial implications of Marriage vs Common Law Canada
- Marriage vs Common Law: Pros and Cons
- Common Law vs Marriage Canada: Is it better to be married or common-law?
Common Law vs Marriage Canada
Does a piece of paper really signify a loving relationship between two people? For many couples in Canada, the answer is no.
Canada leads G7 countries in common law couples, reaching 23% in 2021. At first glance, it’s not a shockingly high number. But pair that with the 447% increase in common law couples in the last thirty years — now that’s substantial.
In day-to-day life, common law couples resemble married ones in many ways. They might buy a house together and kiss the kids goodnight — but a few key differences make these two unions drastically different for your finances. In addition, the legality varies which affects your finances indirectly.
Let’s take a closer look at the definitions of common law vs marriage in Canada below.
What is common law?
Common law describes a conjugal relationship between two people who aren’t married but have lived together for at least 12 months. Similarly, the government might recognize a couple as common law if they share a child and/or the child is wholly dependent on one person in the relationship.
But what if you break up during the initial 12 month period? If we’re talking about storming off for a few days, that doesn’t count. Legally, the dissolution of a common law relationship occurs when you’re separated for 90 days or more.
You’d also be surprised to hear involuntary separation also doesn’t interrupt the 12 months needed for common law. Your partner could be incarcerated, and the Canadian government would still recognize you as a common law couple.
Some couples might prefer common law arrangements because marriage as an institution is outdated. They might feel more comfortable with the easier division of assets. Plus, common law couples avoid the bureaucracy of getting a marriage license and the high cost of a wedding.
Common law looks a lot like marriage. You’ll live together, socialize together, be intimate, share expenses, approach taxes together, and maybe have children. Even in the event of separation, the court respects custody issues for common law parents the same way as married couples. You just don’t have the same financial bounds to your partner as you would in marriage (more on those implications below). However, you can add a layer of protection to your finances in common-law with a cohabitation agreement.
What is marriage?
Marriage describes a “lawful” union between two consenting people. They may have married in a church ceremony or opted for a simple city hall wedding. Either way, they share a marriage license which was obtained from the government.
As of 2021, 40.6% of Canadian couples are married with children. There’s a whole host of other criteria married couples must meet, like age minimums. You can learn more by reviewing Canada’s Civil Marriage Act.
People might decide to get married for a whole host of reasons. If you’re religious, a marriage ceremony could have spiritual benefits or be a part of family traditions. Some couples also prefer to raise children under an ostensibly more stable marital institution. Finally, many see marriage as a symbol of devotion and status. However, that argument is easily debated given the country’s high divorce rates. At the moment, Canada’s divorce rate is between 40% and 50%. In other words, roughly one of every two marriages end in divorce. In addition, only about 8% of Canada’s population enters a prenuptial agreement before getting married.
Speaking of divorce: married couples have more hoops to jump through upon a separation. In addition, with the absence of a prenuptial agreement, how your finances are handled upon divorce is entirely up to Canadian law. Sure, you can argue in court for what you want, but it’ll cost you in legal fees. We’ll get to that shortly.
What is considered common law in Canada?
The Canadian government recognizes you as a common law couple if you’ve:
- Lived together continuously for 12 months in a conjugal relationship. These 12 months aren’t interrupted by short breakups — unless they exceed 90 days.
That’s the main criterion; however, you might be considered common law if you:
- Share a child with your partner
- Financially provide for your partner’s child (they’re a dependent)
Sounds pretty similar to marriage, right? Let’s explore the ways the two unions differ:
How is marriage different from common law?
Marriage differs from common law in all the administrative ways you could think of. Accounting, taxes, property rights, and divorce all vary between common law and married couples.
Here are the main differences between marriage and common law:
- Inheritance: Married couples receive inheritances automatically if a spouse dies without a will. Common law couples don’t have that same treatment, so it’s best to write a will if you want your partner to inherit your wealth.
- Property: Married couples split debts and assets upon separation, even if one spouse bought the asset or acquired the debt. This is Canadian law, but prenuptial agreements signed before marriage can change the way assets and debts are divided in the event of divorce. Common law couples exit the union with whatever property they own and obtained throughout and before the union. In other words, it’s more difficult to “go after” the other party’s property in the dissolution of a common law relationship. One lawyer tells Global News it’s difficult for a common law party to prove they helped pay for a property if the property has the other party’s name solely on the title.
- Recoupling: Married couples must obtain a legal divorce before having the right to remarry. Common law couples can leave and enter a marital or common law union without having to undergo extensive divorce proceedings.
- Taxes: Married couples can file taxes jointly and receive benefits for doing so. However, common law couples still experience tax benefits when they inform the CRA of their union. They can transfer credits to one another and pool income for certain deductions and expenses. However, married couples generally have more tax benefits than common law couples.
- Spousal support: It’s easier for the courts to determine spousal support obligations for married couples. However, common law couples can still file for spousal support upon separation — it’s just not as automatically granted as with a married couple.
Is common-law the same as marriage in Canada?
No, common law and marriage are two entirely different things in Canada. The main difference between common law and marriage is the level of intention. Generally speaking, common law isn’t as intentioned as marriage. For some couples, common law just happens. On the other hand, marriage is a very intentioned arrangement because you obtain a legal license and typically partake in some kind of public ceremony. For this reason, the termination of marriage will naturally have more implications than common law.
Financial implications of Marriage vs Common Law Canada
Here’s the thing: common law and married couples don’t experience the financial implications of either union unless the relationship dissolves. When the marriage or common-law relationship is intact, there are often financial benefits that single people don’t enjoy. For instance, tax credits and having a two income household to share costs of living.
The biggest financial implications come in the division of assets upon dissolution of a relationship and post-death proceedings.
Property rights are widely different for common law versus married couples. We discussed how common law couples aren’t entitled to properties without their name on the title. The financial implications can be extreme. Let’s say you’re in a common law marriage for ten years and contribute to your partner’s mortgage. Ten years of split payments could easily add up, especially if you live in a city like Toronto or Vancouver. But in a common law relationship, those payments only build equity in the home for whoever’s name is on title. Once you leave the union, all those payments don’t mean anything for you. Of course, common law couples go to court to rectify imbalances like this — but it’s a headache and doesn’t always work in your favour.
Similarly, divorce proceedings for a married couple could cost one party the equity they’ve built on a property. Everything is split 50/50, even if one party made zero payments on the asset. Again, a prenuptial agreement signed prior to marriage can help to clarify how the couple will divide assets if the marriage ends in divorce.
Death and inheritance
Married couples are entitled to a one-time death benefit if one party dies. In addition, the property of a deceased spouse automatically goes to the widowed spouse. Common law couples aren’t eligible for the death benefit, meaning they may take the brunt of the resulting costs. Additionally, common law couples without a will are vulnerable to lost inheritances. While it might feel silly to write a will at 30, your common law partner might not be entitled to anything of yours if you were to pass away in an unexpected accident. This could be especially tough if that partner contributed financially to any of your assets.
Related Reading: Financial Conversations to Have Before Marriage
Marriage vs Common Law: Pros and Cons
Relationships aren’t just about feelings — the financial implications make it vital for you to seriously assess which union makes more sense for you. We’ve compiled a list of pros and cons for each to help you visualize the differences:
|Marriage – Pros||Marriage – Cons||Common Law – Pros||Common Law – Cons|
|Automatic inheritance and death benefits||Weddings and rings are expensive||Fewer financial implications||No property or inheritance rights (unless there’s a will)|
|Better for children’s stability||Divorce is common and one of the most stressful life experiences||More accessible (no license required)||Easier for the relationship to end|
|Couples share assets and everything is 50/50||Couples could lose much of their wealth in divorce between asset division and legal fees||Still eligible for certain tax benefits, like pooling charitable donations and family tax cut||Combining income, even though filed separately, could make you ineligible for other tax benefits|
|Couples share debts in divorce||Combining income could make you ineligible for other tax benefits||Couples don’t share debts upon separation||Spousal support isn’t automatic, though still possible|
Common Law vs Marriage Canada: Is it better to be married or common-law?
With more and more couples opting for common law unions in Canada, you might assume common law is better. But everyone’s relationship is different. While common law might work well for one couple, marriage could be better for another couple. Your relationship is personal so how you decide to commit in the long term will also be personal.
Your first step is to be aware of your needs and financial situation. Consider what your relationship means to you, and whether marriage would make you feel fulfilled spiritually. In the same vein, consider how each union would affect your finances.
Bottom line? There’s no right answer. Whether you’re in a marital or common law union, you can’t assume your finances are always protected. Besides, finances are only one component of a committed, long term relationship. All you can do is prepare as much as possible with either a prenuptial agreement or a cohabitation agreement. It’s also a good idea to write up a will sooner rather than later.
Read More: 5 Steps to Transforming Your Relationship with Money