I want my share in your business!

 

Jill’s sister has been living in a common-law relationship with her boyfriend for 11 years.  They have two children together, they own a home jointly and they have invested in a rental property through a company belonging to her boyfriend.  In all aspects (except for the very expensive wedding), they are like a married couple.  As of late, things have been rocky in their relationship and her sister has sought Jill’s guidance with regard to their rental property. She thought that since Jill is going through a separation herself, she would know the answer to her questions. However, Jill herself was married and she wonders if the same rules would apply to common law spouses.

 

The answer is NO. When it comes to property rights, things are very different for common law spouses than for married spouses. If you are married, Ontario laws very specifically set out how your family property is to be shared.  The rules are clear and will be strictly followed by lawyers and judges (unless you and your spouse agree to share your property differently).  However, this property division scheme does not apply to common law couples in Ontario.

 

It does not mean that non-married spouses have no legal remedies when it comes to property. To rectify what courts often saw as a terrible injustice, Canadian courts have created some legal principles which, if some conditions are established, allow common-law spouses to share in the value of a property owned by the other spouse following a separation. The main legal principle applied by Canadian courts to split assets between unmarried spouses is called “unjust enrichment”.

 

In simple terms, “unjust enrichment” may be established when one spouse made a contribution (financial or otherwise) towards the acquisition, maintenance or improvement of an asset (for instance a piece of property) which is owned by one spouse only, resulting in a financial benefit for the other party, to the first party’s detriment.  In the case of Jill’s sister, it would be profoundly unjust if she did not get to share in the value of the property held in her boyfriend’s company name given that they contributed an equal amount of money and efforts towards its purchase and maintenance.

 

This said, proving unjust enrichment can be quite a challenge sometimes, and the cost of making this claim before a court of law can be out of reach for many people.  For that reason, prevention is always better than cure, and many of the challenges associated with unjust enrichment claims can usually be avoided from the outset with careful family planning through cohabitation agreements and other legal contracts. For more information about this subject listen to our program:

 

«Protecting Your Finances: Marriage Contracts and Cohabitation Agreement (“prenupts”)»  http://www.familylawinabox.com/info/study_box.php

Remarriage and Spousal Support

Jill has met a new man.  He has never been married and asked her the other day if she would ever consider marriage again.  Jill always thought that once was enough but this man, Gary, is very kind, attentive to her needs and he is very respectful of the children.  He dreams of building a family life with Jill and believes that marriage would be the ultimate commitment. Jill is really not sure about this ‘marriage commitment thing’. She is also afraid that it may affect the monthly spousal support she is getting from Jack and that she has fought so hard to obtain… And then what happens if it does not work out with Gary?

If Jill remarries, she will be faced with three possible scenarios.  Her spousal support may be (1) terminated (2) reduced or (3) continue as is.  The main issue that will be considered by a court will be whether Jill’s remarriage is considered a “material change in circumstances”.  In order to change the spousal support terms of an agreement that you signed, you must show that something important changed in the parties’ circumstances and that if such changed circumstances had been present when the agreement was negotiated, it would have led to a different amount being paid.  So, if Jill’s remarriage was a clear possibility when she signed her agreement with Jack, and the agreement does not state that her remarriage would be “a material change in circumstances”, it is likely that Jill’s remarriage would have no impact on Jack’s future support obligations.

If Jill’s remarriage was not likely to occur in a foreseeable future when the parties signed their separation agreement, it is possible that her remarriage will be considered a “material change in circumstances” allowing Jack to ask that his support obligations be reviewed in light of Jill’s new family circumstances (and increase family income). This would not of course guarantee an automatic change, as Jill’s entitlement to support (particularly if it was being paid to her to compensate her for the economic disadvantages suffered during her marriage to Jack) might not change even if she is remarried.

Sometimes, a separation agreement specifically provides that spousal support will end if the recipient remarries.  In that case, the outcome would be quite clear and the spousal support would end the day Jill says “I do” for a second time. 

Spousal support is complex.  When dealing with this issue, courts (and lawyers and mediators) will have the following four objectives in mind: 

 

1) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; 

 

2) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

3) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and

4) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

 

If you are contemplating remarriage, spousal support is only one of the issues that you should  consider carefully with your legal advisor. Understanding how to protect your property in a second marriage (by entering into a marriage contract) is also key to happy endings. Visit our website at www.familylawinabox.com and listen to our program on Division of Family Property for Married Spouses (click here).

Who keeps the family pie?

Jill is hosting a girls’ night out at her house.  She starts talking about her divorce with Jack and explains that she’s entitled to “half of everything”. Her friend Sandy who also went through a divorce 5 years ago tells her that that’s not how it works.  “You divide the value, not the assets”, she says.  A discussion on the subject enfolds and Debra, who has lived in a common law relationship with Dave for 5 years wonders if she would be entitled to claim half of everything as well as a common law spouse. Kathy thinks so, since her cousin got half of her ex’ house after a lengthy court battle, but Carolyn is convinced that this is not the case. And everyone is confused.

 

The rules applicable to the division of family property differ significantly depending on your legal status (married or living in a common law relationship), and also on the province in which you live. In fact, each of the Canadian provinces has its own way of dividing family assets when a separation occurs, whether married of in a common law relationship.

 

For married spouses, there are many general principles that apply in all provinces. The most important one is that all provincial laws share a common goal: to divide equally – or at least fairly – between the two ex-spouses the wealth accumulated by the couple during the marriage.  The basic principle underlying the various provincial family property division schemes is that marriage is a financial partnership and it does not matter who paid for the assets, whether a spouse has contributed more than the other, or who is the actual legal owner of any given asset.  In Ontario, the value of all assets acquired by the spouses (jointly or individually) during the marriage will have to be shared between them. In other provinces, the assets themselves get divided. In some provinces, like British Columbia, the court has the discretion to divide a married couple’s family property the way it feels fair and equitable. In most provinces, however, the judge has no discretion and must abide by very strict rules to which there are many exceptions.

 

For common law spouses, the right to share in the other’s property – and the way property is to be shared – when a separation occurs varies from province to province. For instance, in Manitoba and Nova Scotia, common law spouses are given substantial rights to share in the other’s property after separation.  But in other provinces, like in the province of Quebec, common law spouses have absolutely no right at all to claim a fair share of the property acquired by the other spouse during the relationship.  In Quebec, what is yours is yours and what is mine is mine, so to speak.  In other provinces, such as the province of Ontario, common law spouses are presumed to have no right to share in the other’s property, but if very specific circumstances exist, courts will allow common law spouses to share in some or all of their spouse’s assets upon separation.  It is a myth to believe that you are entitled to half of your ex’s assets if you have lived in a common law relationship for more than three years!  When the parties cannot agree (as is often the case) on how to divide their assets, they will have to bring the matter to court and let a judge decide. This process is, as you know, very costly and (so far as common law spouses are concerned) very unpredictable.

 

Because the laws of each province are so drastically different when it comes to splitting this cherished family pie, it is extremely important to understand the regime that applies to your particular situation, in your particular province. Take the time to inform yourself and obtain proper legal advice BEFORE you move in with someone, get married, make a significant financial contribution or investment in joint assets or in assets belonging to your spouse.  Entering into a well written cohabitation agreement (common law spouses) or a marriage contract (marriage spouses) could avoid many heartaches and headaches.  Why wait until a separation occurs to find out that after all these years of emotional and financial investments, you are not even allowed to eat a piece of the pie…