Common law spouses: is it the same as being married?

We will concentrate on two issues: myths related to common law spouses and those related to taxation, given that income tax  season is near.

Here is an excerpt from the article by Dany Provost published in the Journal des Affaires: “When you die without a will, common law spouses are not recognized. When it is said that, without a will, the assets of the estate devolve 2/3 to the children and 1/3 to the spouse, it is for MARRIED (or civil union) spouses. For common law spouses, the estate goes 100% to the children. If you don’t have children, it goes to parents and siblings. » NOTHING to the spouse!

Common-Law Spouse Myths
Lack of knowledge about the rights of spouses is not a figment of the imagination. Karie-Ann Doyon, a law student at the University of Sherbrooke, echoed a recent study by the Chambre des Notaires which revealed, supported by a survey, that a good proportion of the population believed (falsely) being knowledgeable about the rights of common law spouses. In particular, 62% of respondents believed that the estate should be shared equally in the event of a breakup. « It’s true for marriage, but common-law couples don’t have this protection, » says the student.

After two years together, we are considered married!
This belief is false. The Chambre des Notaires reminds us: « It is wrong to believe that after a certain number of years of living together, common law spouses obtain the legal status of married persons and the protections provided for by the Civil Code of Québec, and this, even if the common law spouses have lived together all their adult lives.

Protection in the event of separation
• Common law spouses are not entitled to the protection of the family residence provided for in the Civil Code of Québec, which legally married couples benefit from.
• Common law spouses do not benefit from the protection of the family patrimony ensuring the equal sharing of certain assets in the event of divorce.
• Common-law spouses do not inherit from each other upon death, so this must be provided for in the will, otherwise the family of the deceased will receive their property.
• The common law spouse is not entitled to alimony.

Children from a common law union
• A child born of a common law union enjoys the same rights and obligations as a child born of marriage.
• Child support may be sought for the needs of the children, from the common-law partner who has a higher income. Common law spouses who are parents of children are subject to the same rules as married spouses regarding their support contribution for their children.
• Even if the parents no longer live together, they continue to jointly exercise parental authority over their children.

In conclusion, the Chambre des Notaires recommends drafting a will, a notarized protection mandate and both signing the purchase contract for your residence. You can also enter into a notarized common law union agreement to establish the rights and obligations of each spouse.

Taxation and common law spouses.
The rules of the Canada Revenue Agency apply and, in some cases, those of Revenue Québec.

Revenue Canada tells us: “Common-law spouse means that you live with a person who is not your spouse, but with whom you have a conjugal relationship and to whom at least one of the following situations applies:

• This person lives with you in a conjugal relationship for at least 12 continuous months.
• You have a child together by birth and/or adoption.

You must mutually record the relationship on page 1 of your tax return.

Tax impacts
Contrary to popular belief, becoming common-law spouses can be negative from a taxation perspective.
• Where it hurts is with allowances, such as GST, Solidarity Credit and family allowances. A taxpayer earning a low income is helped from all sides by the government. But as soon as he/she has a spouse, these benefits are cut off, because it is the household income that counts.

Financial benefits
• Credit transfer: if one of the spouses has no income, the working spouse can claim their non-taxable credits. These credits can lead to a refund of up to $4,000 and gradually decrease as the spouse begins to increase their income.
• Spouse’s pension: a common law spouse can benefit from the spousal pension of most defined benefit pension plans. This is the case of RREGOP, for example.

Widow’s or widower’s pension: a widow or widower can benefit from a widow’s or widower’s pension from the Régie des Rentes du Québec if his or her spouse has contributed to the plan.
• Spousal RRSP: A common law spouse can contribute to their spouse’s RRSP in the same way as a married spouse.
• Pension income splitting: you can benefit from this whether you are married or in a common-law relationship.
• Possibility of bequeathing the TFSA or the RRSP to the spouse without affecting his contribution rights in the event of death
• Asset transfer: Possibility of transferring assets to the spouse without immediate tax impacts.

There are several other positive or negative aspects to the status of common-law partner rather than being single. As tax season approaches, we wanted to remind you of the main points of this subject, which often requires tax and/or estate planning.

For your information, I added the list of all deductions, credits and expenses as published by the Canada Revenue Agency.

To read the article, click here

Sources : https://www.usherbrooke.ca/droit/actualites/nouvelles/details/25239
https://www.lesaffaires.com/blogues/dany-provost/conjoints-de-fait-attention/613400
https://www.justice.gouv.qc.ca/couple-et-famille/mariage-union-civile-ou-union-de-fait/union-de-fait/
https://www.lesaffaires.com/mes-finances/fiscalite/comment-gerer-vos-impots-en-couple/631941