Common- Law Partner Estate Planning Risks
Canadians may think legally married and common-law spouses enjoy equal treatment under the law. That isn’t always so.
CRA defines a common-law partner as a person of the opposite or same sex to whom you are not legally married, with whom you live in a conjugal (marriage-like) relationship and at least one of the following applies:
- the person is the natural or adoptive parent of your child;
- the person has been living in a conjugal relationship with you for at least 12 continuous months; and/or
- the person has custody and control of your child (or did before the child turned 19) and your child is wholly dependent on that person for support.
Under the tax rules, legally married and common-law couples are treated equally.
Definition under provincial estate law
However, neither the definition of common law under estate law, nor a parity between common-law and legally married couples, extends across the country.
The provinces define common-law relationships and how they’re legally treated. In Newfoundland, Nova Scotia, Saskatchewan and B.C., a couple may be considered common law after two years of living together. In Alberta, Manitoba, Ontario, P.E.I. and New Brunswick, the threshold is three years. When the couple has a child together, a lower threshold applies.
Terminology may vary as well. In Alberta, common-law spouses are referred to as “adult interdependent partners.” And although the term “common law” is frequently used in Ontario and P.E.I., it doesn’t actually appear in their laws. Quebec doesn’t recognize common-law relationships at all. On separation or the death of a partner, common-law partners may not enjoy the same rights as legally married couples. Not only does the definition vary across the country, but so do the legal rights attached to the status.
British Columbia’s common-law couples now have the same rights and responsibilities as married couples. When someone dies without a will, whether he was legally married or common law, his partner is entitled to a share of the estate. The same applies in Alberta, Saskatchewan and Manitoba. In the remaining provinces, only legally married spouses have the right to a share of the estate on intestacy. Here’s how this may look.
WHEN A SPOUSE OR PARTNER DIES
Bob and Angie, residents of B.C., have lived together for four years and have a two-year-old son, Ben. Bob dies without leaving a will. Pursuant to B.C.’s Wills, Estates and Succession Act (WESA), the assets comprising Bob’s estate will be distributed
- household furnishings, the first $300,000 of estate assets plus half the balance of the estate go to Angie;
- the balance goes to their son, Ben.
(certain assets, such as life insurance and RRSPs/RRIFs/TFSAs with a designated beneficiary and jointly owned property, may not form part of the estate)
If Bob and Angie were Ontario residents at the time of Bob’s death, the distribution of the estate would be different. It would be governed by Ontario’s Succession Law Reform Act (SLRA), and pursuant to the SLRA, Bob’s estate would be distributed entirely to their son, Ben.
Under B.C.’s law, “spouse” includes a common-law marriage or a marriage-like relationship for at least two years prior to death. In contrast, for intestate succession purposes, Ontario’s SLRA restricts the meaning of “spouse” to either of two persons who are married to each other.
Intestate rights aren’t the only ones where rules differ for legally married and common-law couples. In most provinces, the surviving spouse has the right to make a matrimonial claim against the estate of the deceased spouse. For example, under Ontario’s Family Law Act, a surviving spouse has the right to take his or her entitlement, if any, under the will (or on intestacy), or to make an equalization claim. But only legally married spouses may apply. In most other provinces that provide for matrimonial claims against an estate, such a right does extend to common-law spouses. B.C. does not provide for matrimonial claims.
Ontario, where the rights of common-law spouses are the most circumscribed, other remedies may be available. For example, dependants’ claims and constructive trust claims are open to both legally married and common- law partners. While common-law partners may qualify to make a claim in Ontario, they are not afforded the same rights as a legally married spouse.
To further complicate matters, a province may not be consistent in defining “spouse”—even within the same piece of legislation.
Misunderstandings can be Costly
What it means to be a spouse continues to evolve. Common-law couples receive much greater legal recognition now than in decades past, not to mention the expansion of the definition of marriage to include same-sex couples.
However, you and your clients shouldn’t assume that common-law status is interchangeable with marriage for all purposes in all provinces.
To avoid unpleasant surprises down the road, clients should work with their advisors and prepare wills and powers of attorney, and periodically review them to ensure they reflect their personal situations.