Let’s talk about relationships. Don’t worry, this isn’t turning into a ‘Dear Debbie’ series… In this three-part series, I want to discuss the different types of officially recognized relationships in Quebec and how they can affect your finances.
In today’s “Do It Together” segment, I’ll take you through the first type, de facto unions, what they are, and what happens to your assets should the relationship end.
In Quebec, there are three main types of relationships: de facto unions, and the marital regimes of partnership of acquests and separation as to property.
There are also civil unions but they are beyond the scope of these videos. Write me a comment below if you’d like more information on those.
Let’s get terminology out of the way first. We all use the term ‘common-law’, but the legal term in Quebec is ‘de facto union’. For simplicity’s sake, I’m going to use Common Law, since that’s what everyone understands.
Got it? Great! So, what does it mean to be common law in Quebec? Across the Quebec civil code, the definition actually varies, but generally, it applies when two people, of the same sex or opposite sexes, live together without being in a marriage and present themselves publicly as a couple, for at least a year. If you have children together, under some instances of the law, the one year rule is dropped. We all know lots of people in common law relationships here. In fact, Quebec has the highest rate of them in Canada: Over 30% of couples in Quebec report being common law, compared to 12% in the rest of the country.
But here’s the thing, common law relationships don’t have the same legal protections as marriage.
For instance, if one partner dies, the other is considered single in terms of their civil status, so they have no legal claim on the deceased partner’s assets. In case of a breakdown in the relationship, there is no family patrimony to split (I’ll explain Family Patrimony in my next video), and there is no obligation for spousal support. Now if there are children as a result of the relationship, child support must still be paid and it’s determined based on a formula set by the Ministère de la Justice. I’ll put a link below if you want to know how that calculation works.
The common law legal precedents were tested with the famous ‘Eric’ and ‘Lola’ case. I won’t get into too much details but Eric and Lola were a couple who lived together for seven years, never married, and had three children. Eric also happened to be extremely wealthy. After they separated, Lola sought spousal support of a lump-sum of $50 million dollars and $56,000 a month. The problem is, as I said earlier, Quebec’s Civil Code has no protections for common law relationships. Eric agreed to pay generous child support but refused to pay Lola any spousal support. The case went all the way to the Supreme Court of Canada which upheld the Quebec Civil Code and Lola did not receive spousal support.
Now it’s not entirely bad news! Common law relationships do benefit from most, if not all, of the tax advantages of being married. You can roll your RRSPs and TFSAs to your partner on death without incurring tax, so long as you’ve stated it in your will. You can also benefit from sharing certain deductions and credits in your tax return.
You can (and should) put certain protections into place during your relationship through the right legal documents. These include a cohabitation agreement, a separation agreement that covers property separation and spousal support, a will, a joint ownership contract for jointly owned assets, and maybe powers of attorney if appropriate. You can also designate your partner as the beneficiary of your assets such as your life insurance. This is where you want to talk to your financial advisor and a lawyer.
So that’s the overview of de facto unions. In my next video in this series, I’ll talk about the marriage regime of partnership of acquests, aka the default regime.
Child support formula: https://www.justice.gouv.qc.ca/en/couples-and-families/separation-and-divorce/children-a-joint-responsibility/child-support/the-quebec-model-for-the-determination-of-child-support-payments/
Eric and Lola case: http://www.cbc.ca/news/canada/montreal/unmarried-quebec-couples-have-no-right-to-alimony-court-rules-1.1322347