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Financial & Estate Planning for Common-Law Couples

According to the Statistics Canada website, common-law relationships are more likely to fail. The General Social Survey issued by Statistics Canada in July 2002 illustrates that common-law unions are twice as likely to end in separation as marriages and these relationships are far more common today than they were over a decade ago.

Many mistakenly believe laws across Canada are consistent in how they treat common-law relationships. Nothing could be further from the truth. There are federal laws that govern how these unions are treated for income tax purposes. Each province, however, dictates what constitutes such a relationship and how it is viewed legally.

In BC, a March 2013 ruling now treats common-law couples the same as married couples if they have cohabited for over two years. In Alberta, these are referred to as "adult interdependent partners" and are deemed a common-law relationship when the couple has lived together for more than three years, or has a child and live together. A couple can be considered common -law in Newfoundland after living in a conjugal relationship for over two years. In Nova Scotia, a couple living together over two years would be entitled to spousal support, but would not be permitted to claim property. However, they would be permitted to register as a "domestic partnership" under the Nova Scotia Vital Statistics Act. In Manitoba and Ontario, a couple would have common-law standing if they have lived together for three years or one year if they have a child. A couple in Manitoba can register their common-law relationship at the Vital Statistics Registry.

Because the laws vary so much from province to province, here are some steps that can be taken to protect oneself in a common-law relationship:

Cohabitation Agreement- Go to a lawyer and get one. It will probably cost less than a wedding, but it will determine how assets and debts will be dealt with if the union fails. Decide if you want to put any assets, including investments, in joint-ownership.

Will - Get a will and the other important estate documents professionally prepared as that will lay out exactly how you want your things dealt with when you die or become seriously ill. Consideration needs to be made for previous support obligations.

Life Insurance - Work with an insurance and financial advisor to make sure you have adequate coverage and review beneficiary designations. Make sure obligations will be properly met on death.

Accident & Sickness Insurance - This includes disability insurance that can provide an income if you can't work because of illness or injury; critical illness insurance that pays a lump sum if diagnosed with a listed critical illness; and, long-term care insurance which pays a benefit to offset the costs of caring for someone who can't look after themselves.

Certainly most of the above recommends apply in any situation. Nobody really wants to be a burden on someone else. Extra steps and attention should be taken in a common-law relationship as each person entering into it is more vulnerable than they may wish to believe.

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Canada Retirement Information Centre Retirement Income Specialists Suite 212, 1827 Woodward Drive, Ottawa, ON K2C 0P9 (613) 225-2020 Toll Free 1-800-524-7743