Your Finance
By Ira Marcovitch, LL. B
Complications of the common-law relationship
Second relationships have become commonplace and, while many choose to marry, many who have gone through one divorce are choosing to remain in a common-law relationship.
While it is not exactly romantic to enter a relationship thinking about how it will end, even common-law spouses need to consider how they will financially protect themselves and their family should the relationship end. Common-law relationships are treated differently than marriages when it comes to dealing with property upon separation, and its important to understand what applies to your situation. Later in life, the stakes are higher — you may have a home, a cottage, investments, or business shares. Oftentimes, the largest asset other than the home will be your pension. If your relationship goes south, there really can be a lot on the line.
Entitlement to property for common-law spouses is one of the most commonly misunderstood areas of family law and can be one of the more complicated. In the most basic terms, the treatment of pensions in family law will depend on whether the pension is in pay at the time of separation and the parties’ marital (or common-law) status.
Scenario 1:
Pension as property (Pensions Not in Pay)
Partner A and Partner B are in a common-law relationship for several years. The relationship has dissolved, and Partner B has not started receiving their monthly pension payments.
When married spouses separate, they are entitled to claim an equalization of their net family properties under Part I of the Family Law Act. This allows spouses to share the increase in their respective net worth over the life of the marriage. However, common-law spouses do not have access to Part I of the Family Law Act. For a common-law spouse to make a successful claim for any type of property, they will have to establish an equitable claim, generally, that they contributed to the value of the asset in a way that has not already been compensated for, or that the parties were in a joint family venture, of which the pension was a part. If successful, a court may impose a ‘trust’ — a legal remedy whereby your spouse (the legal owner of the property) holds some portion of the value of the asset for your benefit or order compensation in some other form.
With regards to pensions as property, there are two categories of pensions for family law purposes: CPP and everything else. Just as with married spouses, common-law spouses are entitled to claim a division of CPP pension credits that accumulated during their relationship, so long as they have cohabited for at least a year prior to the application for division. For all other pensions, the traditional rules of family property apply, and common-law spouses do not have an automatic right to them. However, if one partner can demonstrate that they somehow contributed to the growth of the pension and haven’t been compensated, they may be entitled to a portion of it.
If Partners A and B split up, Partner A would have no automatic claim to any portion of Partner B’s pension that accrued during the relationship. For Partner A to prove any entitlement, they will need to demonstrate that they were in a joint family venture or that they have contributed to the growth of the pension that they have not been otherwise compensated for.
Scenario 2:
Pensions as income (Pensions In Pay)
Partner A and B are in a common-law relationship. When they separate, Partner B has retired, and their pension is in pay at the date of separation.
Once pensions go into pay, family law usually treats them as an income source and not as property. If a pension is in pay at the date of separation, it is generally not included in the equalization calculation for married spouses. Instead, pensions are treated as a source of income for the pensioner and can be included in determining their income for the purposes of child and spousal support, should those be applicable claims. In rare cases, the Court has treated pensions in pay (or a portion thereof) as property; however, these are unusual circumstances that usually arise in the context of equitable claims and are the exception.
In any of the above circumstances, or where a dispute may arise about entitlement to pensions in the family law context, it is always best to speak to an experienced family law lawyer who can give you advice specific to your case. If you have any questions regarding pension entitlement in the family law context, contact one of the experienced family law lawyers at Nelligan Law.
Ira Marcovitch is an associate lawyer with the Ottawa law firm of Nelligan Law (nelliganlaw.ca) and a member of the Family Law practice group.
NOTE TO READERS:THE VIEWS OF THE AUTHOR DO NOT NECESSARILY REFLECT THOSE OF COYLE MEDIA GROUP.THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE, OR A SOLICITATION TO BUY SERVICES. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.
