More and more millennials are living together with their partners and not getting married. According to the Financial Post, common law relationships have increased four times from 1981 to 2011 in Canada. There are a myriad of reasons why we are shacking up and living together with our
partners, months or years after dating. Some of these are not very good reasons, such as to save money in a high cost of living area, wanting to test drive living together before committing (which can be a good reason to live together), or just not wanting to be living alone. Unfortunately, it seems that people are just ‘sliding’ into relationships more often these days without communicating about what their expectations are in the relationship. In any case, if you are planning on living together and in an intimate relationship, you should probably think about a cohabitation agreement.
Cohabitation agreements aren’t very popular though. An Ipsos poll by Global News found that only 8% of married couples have a prenuptial agreement, and even less common law couples have a cohabitation agreement.
I have two girlfriends who came in with more assets (they each owned a one bedroom condo) than their current boyfriends. Both received
nagging encouragement from me to look into a cohabitation agreement. Both earn more than their boyfriends. They were unaware that in British Columbia, the laws have changed and if you have a child or have lived together for more than two years in a living together arrangement/ intimate relationship then you are considered common law married. This means that there are similar laws as if you were married. This could mean that any appreciation from their condo during their relationship would be divisible by half in the event they split up and their ex wants to divvy their assets up. Not only condo, but pension, investments, and anything that increased during the relationship.
Eventually, after living together for a few months, both brought up writing up a cohabitation agreement with their boyfriend (who were both insulted unfortunately) and ended up writing one up but without witnesses or having it notarized (e.g. not official). I guess better than nothing?
Another example is an older colleague of mine who was with her common law husband for 15 years. She owned a house in Vancouver that was given to her by her mother. They both lived in it for 15 years. I think they had their arguments here and there but she seemed happy and spoke of him in a good light all the time. Then one day, he decided to leave her and their cat and then asked to have the house and their assets (including her pension) divided up. It was a completely horrific and heart breaking experience for her.
Thankfully I learned my own lesson, I was living with my ex-boyfriend for 1.5 years (a few more months and we could have been considered common law married) in a house we bought together. We called it quits and split the house in half. I was lucky in that we didn’t split it further or get nitty gritty with the details (I know a person who is divorcing from his ex wife who is arguing with him about dividing up their Aeroplan points).
When I was dating my husband, I didn’t want to live together until I had the green light of commitment first (engagement) and that worked for me- it might not be for everyone! And even then we drafted up a prenuptial agreement. It wasn’t easy to write up because it required us to think about what would happen if we were to ever dissolve our future marriage, but I am glad we did one.
check out the laws in your province first
The laws vary from province to province.
In British Columbia, the Family Law act according to Clicklaw Wikibooks states that if you have a child and you are in a common law relationship for under two years, you are only entitled to spousal support and not division of assets and debt. If you are in a relationship living together for more than two years and the relationship disintegrates, you are entitled to division of assets and debt and have similar rights to if you were married.
For example, in Ontario, if you are living together even for 8 years and you split up, you are not automatically entitled to the division of assets, according to Ontario Family Law.
You can call the Dial a Law service to for more information on laws for the other provinces or territories. I am not a lawyer so I am not sure about what they are.
why you need a cohabitation agreement
The reason you would need a cohabitation agreement is to protect your assets. Unfortunately no one can predict the future and what happens in the relationship. I didn’t think that my ex and I would end up having to sell the house at the time we bought the house! Life can be very unpredictable that way. One minute you’re doing great and the next you don’t know what hit you.
Of course, if you’re both young, have similar assets and perhaps similar incomes, and are renting and dividing things up 50/50 anyways, spending the $500 to $2000 to get one done might not be necessary for you. It all depends on your level of risk that you want to take.
it’s not that difficult to create
Cohabitation agreements are not that difficult to create, and in fact, there are some that you can create online (just like my friends did). However, for it to be truly enforceable in court, you are each encouraged to get your own lawyer and legal advice, to make sure that neither of you were coerced into writing the agreement.
Readers, do you live together with your partner?
Do you have a cohabitation agreement or have you discussed what might happen if things were to go sour in the relationship?
What are the laws in your neck of the woods regarding ‘common-law’-like relationships?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.