The COVID-19 pandemic has completely changed how we live and work. With the stay at home order in late March, many couples chose to self-isolate together, rather than spending months apart.
For couples who have never lived together this comes with a variety of complications. People that chose to move in together quickly, may not have thought about some of the longer-term implications of cohabitation.
In Ontario, the laws of property equalization do not apply to those who are living together, only married couples. This means that should your living arrangements end, and you are forced to divide up assets, there is not law saying that they must be divided equally. This can be even more complicated of one party ends up being financially dependent on the other. Ontario’s Family Law Act states that for spousal support to apply after a relationship ends, a couple must be cohabitating for at least three years, or have a relationship of some permanence and a child.
This doesn’t mean you shouldn’t move in with your significant other. In fact, it is quite common for couples to live together before getting married. However, it is always a good idea to consider a cohabitation agreement if you are planning on living with your partner for an extended period of time.
What is a cohabitation agreement?
Similar to a marriage contact or prenup (as they call it in the U.S.) a cohabitation agreement is a document that you create with your partner that outlines how you will deal with issues while you are together, as well as what things will look like if the relationship ends. This most commonly includes how bills will be paid, how joint purchases and expenses will be covered, and, of course, how you will divide your property and debts if you separate.
Why is it a good idea?
Cohabitation agreements are always a good idea because it not only puts major responsibilities down on paper, it can also save you time and costly litigation if you end up separating from your partner. Even though there is no property regime for couples cohabitating in Ontario, entitlement to certain things can still be established throughout a couple’s time living under the same roof. The lack of rules for property division for common law couples can make battles for property rights long and expensive for both parties. If the couple has a cohabitation agreement, where they have clearly outlined who gets what, the separation can be much less litigious, costly and stressful overall.
How do you make create a cohabitation agreement?
To put together a legally binding cohabitation agreement both parties much have separate legal council. Full financial disclosure is also required to make sure there is a clear picture of the assets that each person is bringing into the cohabitation arrangement. This includes financial statements, RRSP statements, non-registered investment statements and, if either person is the shareholder beneficiary of a trust, the estimated value of that trust.
Cohabitation agreements must also be created under contract law which means that neither party should be under duress or undue influence when they are signing the document.
The past few months have been a challenging and it is no surprise that many have chosen to be close to their loved ones during this time. However, if you are planning on making living together a long-term thing, consider looking into the creation of a cohabitation agreement. It may end up saving you a lot of time, money and stress in the long term.