Married vs. common-law spouses: Legal and financial differences

Quebec couples are a unique breed in Canada. According to Statistics Canada, Quebecers are nearly twice as likely (20 percent) to choose common-law unions over marriage than other Canadians (11 percent). However, myths surrounding common-law unions persist to this day. One study by the Institut national de recherche scientifique (INRS) (in French) revealed that no less than 45 percent of common-law couples mistakenly believe they have the same legal status as married couples. While there is no consistent definition for common-law relationships, many governmental services, such as Revenu Québec, state that a couple is considered common-law once they've lived together for at least 12 months in a conjugal relationship or had a child together. This status certainly comes with legal and financial changes, but it does not grant the same rights as marriage. Below are the key differences between marriage and common-law unions.

01Debt and property division

Whether you're married or in a common-law relationship, you remain responsible for your property, your personal debt, and the debt you accumulate with your spouse. For example, if you sign up for a joint credit card or obtain financing to buy a car together, you are responsible for these debts. If you're married, joint assets are considered family patrimony. Your home, furniture, appliances, family car, and any sums accumulated in a pension plan during the marriage are all part of your family patrimony, which also includes your shared debts. Generally, if you divorce, the net value of your family patrimony is divided equally between you and your spouse.

A matrimonial regime establishes which rights and powers each spouse has over any private property not included in the family patrimony. There are three main matrimonial regimes in Quebec: partnership of acquests, separation as to property, and community of property.

Have you considered drawing up a common-law contract?

While the law does not specify how property will be divided if common-law partners separate, these couples can set out their own division of property rules in a common-law contract. In this written agreement, spouses can, for example, establish who will be responsible for certain debts and who will keep the property acquired together. A contract is especially recommended if you plan to buy property together, as it will allow you to determine what would happen to the property in the event of separation or death.

02Inheritance

Laws concerning inheritance are also different depending on your marital status. Unlike married couples, common-law partners do not automatically inherit from one another. For your common-law partner to be considered your heir, you need to name them in your will. Otherwise, your property will be divided among your children. If you don't have children, your parents and siblings will be your heirs. To ensure that your partner inherits from you after your death, you can also take out a life insurance policy and name them as your beneficiary.

If you're married, the rules of family patrimony and of your chosen matrimonial regime will apply. Once all debts are paid, your property will be divided according to the instructions in your will. If you don't have a will, the law stipulates that a third of your property will go to your spouse and two thirds to your children, in equal shares.

03Spousal support

While an ex-husband or ex-wife can request spousal support to help them meet their financial needs, common-law partners are not entitled to the same rights. This major difference between marital statuses was highly publicized in Eric vs. Lola. In 2013, the Supreme Court of Canada ruled against Lola, the former spouse of a well-known multimillionaire entrepreneur, who had been seeking a lump-sum payment and part of the family patrimony. During their relationship, the couple had three children together.

Do the rules governing child support change if you're married?

No! Whether you're married or common-law, both parents must financially support their children after a separation. In accordance with the Quebec model for the determination of child support payments, the non-custodial parent must pay child support to the custodial parent. In the event of shared custody, the spouse with the highest income may be required to pay child support to the other.

04Health

When we're healthy, we tend to avoid thinking about worst-case scenarios. But some things are important to consider. If you're legally married and become incapacitated, for example, your spouse has the right to look after your current family needs and cover your mortgage, electricity, heating, food, and medical bills. Common-law partners do not have the same power of representation. It's therefore in their best interest to draw up a protection mandate to give their partner the right to manage their affairs in case of incapacity. If you don't have a protection mandate and suddenly find yourself in need of protection, anyone from your circle of friends and family can ask the court to put into place protective supervision. The court then calls a meeting with your friends and relatives, who give their opinions on whether protective supervision should be used and who should act as the adviser, tutor, or curator. A tutorship council will also be created to supervise and ensure your overall well-being.

05Your spouse's RRSP

Both married and common-law spouses can contribute to their partner's registered retirement savings plan (RRSP). Putting money into your RRSP or your spouse's helps reduce your RRSP deduction limit, as well as your taxes. If you're 71 and this is the last year you can contribute to your RRSP, you can still contribute to your spouse's if they're within the age limit. However, you can't transfer sums from your RRSP to your spouse's.

Have you thought about pension income splitting?

One of the biggest advantages of a spousal RRSP is that it allows you to split your pension income if one of you earns significantly more than the other. This effectively reduces your combined tax bill. For example, if upon retirement you each withdraw $40,000 in the same year, you will pay less tax than if one of you withdrew $80,000. However, other sources if income may void this benefit.

06Taxes

During tax season, common-law and married spouses are on equal footing. Both are eligible for the same tax deductions, such as those related to childcare costs, child support, and dependents.

Choosing to be married or common-law is a very personal decision. That said, if you're in a common-law partnership, you should consider setting out your own division of property, inheritance, and child support rules in case of separation. According to the above-mentioned INRS study, only 8 percent of common-law partners have a written contract. Life is unpredictable, so it's in your best interest to plan for every eventuality.