In Canada, the prevalence of divorce now seems to be part of modern life. It is accepted that people enter relationships, often have kids, and then leave when the relationship breaks down. One of the less heralded outcomes of this is that more and more people are entering into serious relationships in or near their ‘golden years’. These older couples often have adult children from previous relationships and assets built up over a lifetime of work and saving. They often want their own children to inherit the majority of their assets and want to limit the extent of their assets going to their new partner.
However, the British Columbia court system can make this a challenge. Since the Family Law Act came into effect, cohabiting couples are now effectively married after a two-year-period and are legally defined as spouses. For older couples entering relationships, this – and the legal ramifications – can be a surprise. As spouses, they each have a potential claim to the other’s property, to spousal support, and ultimately to a portion of the other’s estate. Even when a new couple is in agreement that they wish their individual assets to go to their own children, living together or getting married can still allow a potential heir to make a claim against the other party’s assets after they have passed away.
What can be done if you find yourself in such a situation? First, it can be a good idea to speak to your spouse about his or her expectations. It is far better to have that difficult discussion early while on good terms rather than later after a relationship breaks down or when other family interests are involved. Second, a cohabitation or marital agreement can be extremely important to solidify the expectations of both parties. Though there is some flexibility under the Family Law Act, it is still a government mandated solution to a very human problem. A cohabitation agreement allows couples to structure their potential breakups how they wish (within limits) and many people find that more appealing than a top down solution imposed after the fact by the court system or attempting to agree to a settlement after the relationship has already fractured. Cohabitation agreements are not bulletproof and can be overturned if unfair in the eyes of the court or if the situation changes drastically, but they still go a long way to allowing couples to agree on potential outcomes of a separation early on in their relationship.
Another thing to consider is how your assets are structured. There are legal implications to commingling assets or buying assets in both parties’ names. Often couples will agree to purchase a residence together and have an informal oral arrangement about how it is paid for and whose it ultimately is. However, without a cohabitation agreement or other contract this can be difficult to enforce and people’s understanding of the oral agreement can shift over time – often in opposite directions. Additionally, some recent Court of Appeal decisions have ruled that placing property in one party’s name can be viewed as essentially a gift to that party. Whenever you are getting married, approaching common law status, or purchasing real estate or other major assets, it is important to consult with a lawyer to ensure that you are aware of the family law and estate law implications.
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Disclaimer: This blog post is for informational purposes only and should not be construed as financial or legal advice. Consult with qualified professionals to create a personalized estate plan suitable for your specific circumstances.
