It is becoming more common for people to start new relationships later in life, at a time when financial circumstances, retirement planning, and long-term security are especially important.
When Spousal Status Applies
In British Columbia, the law treats couples as legal spouses if:
1. they are married, or
2. they have lived together in a marriage-like relationship for at least two years (common law spouses). Even if they do not live together full-time a relationship may still be considered marriage-like under the law, depending on the circumstances.
If such a relationship ends and there is no Cohabitation Agreement (for common law spouses) or Marriage Agreement (for married or soon-to-be-married spouses), the default family law rules apply, meaning that:
1. family property is generally divided on an equal basis, and
2. spousal support may be payable.
Family Property and Excluded Property – the Default Rules
In British Columbia, the default family law rules divide property into two categories:
1. family property, and
2. excluded property.
Family property includes everything the spouses own at the time they separate, regardless of whose name it is in. It also includes any increase in value of excluded property.
Excluded property includes things owned before the relationship began, as well as certain gifts or inheritances, some settlement money, certain insurance payouts, and some interests in trusts.
The basic default rule is:
1. family property is divided 50/50, and
2. excluded property is not divided.
Spousal Support – the Default Rules
In British Columbia, the default family law rules provide that spouses may have an obligation to support one another after separation, even if they were never married. Spousal support is not automatic, but it can be ordered where one spouse is financially dependent on the other or where there has been economic disadvantage arising from the relationship.
What a Cohabitation Agreement or Marriage Agreement Can Address
Among other things, a Cohabitation Agreement or Marriage Agreement can allow spouses to:
1. opt out of the default property division rules and decide in advance how property will be treated if the relationship ends, and/or
2. address spousal support, including whether it will be waived or limited in amount and/or duration.
Why Property Provisions Matter
The ability to opt out of default property division rules is especially important for seniors. Many seniors have accumulated assets – such as homes, pensions, and investments – that are intended to fund their retirement. If the increase in value of those assets becomes family property and is divided equally per default property division rules, the income generated from them (such as interest or rental income) may no longer be fully available to support one person’s retirement. Financial decisions made during a new relationship can also affect excluded property. For example, some people choose to remortgagetheir home during the relationship. While the value of the home at the start of the relationship may be excluded, remortgaging can reduce the value of that exclusion.
Why Addressing Spousal Support in Advance Is Important
The ability to waive spousal support or predetermine the amount and/or duration is particularly important for seniors, as retirement income is often fixed, and ongoing support obligations may significantly affect a person’s ability to meet their own living and healthcare needs.
General Benefits of a Cohabitation Agreement or Marriage Agreement
Some of the key benefits of a Cohabitation Agreement or Marriage Agreement include:
• allocation of costs during the relationship, including how everyday expenses like rent, utilities and groceries will be paid;
• protection of your interests, including assets such as retirement benefits;
• clarity and certainty on the terms that will apply if the relationship ends, including if spousal support will be payable and/or how assets will be divided;
• reduction in conflict if the relationship ends, including disputes about property division and spousal support;
• reduction in the risk of costly disputes if the relationship ends, including by adding provisions that require dispute resolution, such as mediation, before litigation; and
• preservation of estate planning intentions, ensuring assets pass to intended beneficiaries, rather than being altered by family law claims.
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