In a prior blog on millennials and estate planning, I discussed its importance for the younger generation and the unintended consequences that can result from failing to have proper planning in place. In today’s blog, I hope to take that notion a step further by discussing family law implications that should be considered by millennials as they progress through relationships, living situations, and even marriage.
Before marrying or cohabitating with a spouse or partner, it is important to assess the legal implications of this important step. The first consideration is to understand the difference in legal rights that arise between being in a common law relationship and being legally married. With 53 per cent of Canadian adults feeling marriage is unnecessary (including millennials who are moving further away from the marriage trajectory), a common misconception is that a common law partner has the same rights and legal standing as a married spouse.
Under family law legislation in Ontario, upon a marital breakdown, married spouses are subject to equalization of their net family property (in general terms, each calculates how much of their net worth (with certain exclusions such as gifts and inheritances) was accumulated during their marriage and the spouse with the lesser amount has a claim to equalize property. Common law partners are not entitled to a claim to equalize upon a relationship breakdown. As well, a common law partner has no right to the share in their partner’s estate on an intestacy if their partner does not leave a will.
With respect to support claims, common law partners, like married spouses, have the right to make claims for spousal support under Ontario family law legislation once they have lived together for three years, or earlier if they have a child together. For example, if a young couple decides to live together after university, as many millennials do, and eventually their relationship ends after several years, a claim for support could be made by one against the other.
Living common law puts one in a vulnerable position compared to being married when it comes to division of property, and also with regard to support until the threshold test for support has been met. However, the law differs in each jurisdiction with respect to the rights of common law partners. Regardless of the situation or jurisdiction, it is important to understand that the rights of a common law partner are often very different than those of a married spouse, which could create significant issues if proper planning is not in place.
Along with considering the differences in legal rights between a common law relationship and marriage, it is important to determine whether a domestic contract, such as a cohabitation agreement or prenuptial or postnuptial agreement, should be used. A domestic contact can address concerns about protecting certain assets, such as a residence, shares of a company, significant wealth, or a family inheritance, and allows for parties to contract out of equalization and spousal support upon a relationship breakdown or death. For further information on domestic contracts, please review our blog on this topic.
Interestingly, U.S. statistics demonstrate that millennials are buying into the notion of domestic contracts, particularly with respect to protecting intellectual property, such as music, software and technology concepts, and real property (please refer to The Globe and Mail article and The New York Times article for a further discussion on this topic). These numbers are encouraging to see and that the high sensitivity around asking for a “pre-nup” may be dissipating. Hopefully this trend is not limited to our U.S. neighbors. Canadian millennials, take note!
At a time in their life where there are few significant assets, both parties are financially independent, and they have an entire future to build together, it’s not surprising that a young couple might not consider the repercussions of a relationship breakdown as a high priority. Although millennials are challenging the status quo and altering the norms of conventional relationships, the way that the new relationship norms fit into traditional law cannot be disregarded, since the unintended consequences can be as disruptive for them as it is for every generation. Families are encouraged to continue dialogue around these topics and seek the necessary legal advice as millennials embark on the next chapter of their lives.
-O’Sullivan Estate Lawyers
The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.
Hot off the Press! Please see the article “When kids squander money, parents are squarely to blame” published in The Globe and Mail on January 14, 2019 in which Margaret O’Sullivan is quoted.