We’ve recently written about the importance of having a comprehensive cohabitation agreement, especially if you’ve been through a divorce and are now living with, or about to move in with a new partner.
Like other domestic contracts, cohabitation agreements are designed to bring stability to a situation that is often emotional, confusing and uncertain. These contracts can also help keep retirement savings safe as they minimize the likeliness that couples will end up in court fighting about finances should the relationship end. If you’ve already been through a divorce, and have experienced financially difficulty because of it, a cohabitation agreement could prove to be very beneficial.
But not all cohabitation agreements are created equally. While every contract will differ depending on the couple’s individual circumstances, they should all address the following issues:
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When Ontario couples have lived together for three or more years, they are considered common-law. Unlike married couples, common-law partners do not have any automatic entitlement to divide assets accumulated during the relationship. In many cases, couples leave with what they brought into the relationship. That being said, things can get complicated from a legal perspective if the couple created a joint bank account, or if only one party owned the home the couple lived in, but the other made regular mortgage payments.
Make financial responsibilities and expectations clear from the start. Decide who will pay for what bills, how major joint purchases and expenses will be covered (and divided should the relationship end), if bank accounts will be kept separate, and if spousal support will be paid should the couple decides to part ways.
Investments in the Home
Real property can be a contentious issue regardless of whether a couple was married or not, but again, the issue may be more complicated for ex common-law partners because a party who is not on title of the home has no intrinsic right to it. If just one person owns the home, both parties will need to agree on whether the non-owner will acquire an interest in the property should they terminate the relationship, depending on what the non-owner contributes to the home. That includes mortgage payments, renovations, and to a certain extent, maintenance.
Without a clear, written agreement in place, an ex partner who made investments in the home, but did not own it, could make an equitable relief claim against the home-owning party, and resolving this issue in court can be time consuming and costly.
Spouses who have children from a previous marriage often have assets set aside just for them, and they should include provisions in a cohabitation agreement to ensure that those assets are explicitly kept separate from the parties’ other finances. Furthermore, child arrangements should be laid out; is there an expectation that the new partner will pay for any child related expenses, help with parental duties, or pay child support if the parties don’t stay together? Minimizing uncertainly early on is beneficial for everyone, but is especially important when children are involved.
On a final note, parties should bear in mind that a cohabitation agreement is a living document, and a review or variation clause should be included so that couples have an opportunity to reconsider the agreement should their circumstances change.
The future mat be uncertain, but that doesn’t mean you should leave the important things to chance. If you have more questions about cohabitation agreements, we invite you to speak with one of our family lawyers, free of charge.