New Law May Affect You - Common law property issues
| December 18, 2018 | by Kimberley Ketsa
On December 11, 2018, new legislation came into force in Alberta. While you may not have heard about it, it could have a huge impact on your property ownership if you are a in a serious relationship. The law affects what is often considered common law property.
The Family Statutes Amendment Act adds important new property rights and obligations for common-law couples in what will be called the Family Property Act. In particular circumstances, the Family Property Act treats couples that live together as if they are married by law, whether or not anyone walked down the aisle.
Until the new Act, common-law couples in Alberta had very different property rights than married couples.
When married, the default law is that everything accumulated during the marriage is matrimonial property, no matter who earned it, paid for it, or whose name is written as owner. Each spouse has equal entitlement to the value of matrimonial property. (There are more complicated factors and exemptions involved in the final legal analysis, but the simplified version is everything is owned equally in marriage). The Matrimonial Property Act laid out the rules for how property might be divided if the marriage ends.
Therefore, those who made the clear choice to be married signed up for equal property rights and 50/50 distribution upon divorce. Conversely, unmarried couples that lived together did not have a set of written laws to govern what happened when their relationship ended.
Most would assume this meant that unmarried couples did not have to share their property or value, so long as they kept things in their own name and didn’t tie the knot. However, families have evolved over the decades, and many unmarried couples have children, blended families, intertwined finances and relationships of interdependence. Some of these relationships would break down, causing a crisis of finances, confusion over ownership and a need for fairness. The lack of written legislation on property rights for cohabiting couples forced judges to fill the gaps in the law with complicated principles, such as the law of constructive trusts and unjust enrichment. Depending on the unique facts of each case, property could be divided piece-meal, and awards could range from 0% – 50% value. There was no sense of consistency or certainty for couples breaking up. Lawyers and judges shared in the sense of uncertainty .
There was a consensus within the Alberta legal community that laws on common-law property rights needed to come into place to reflect the diversity and complexity of family relationships in the province. Written legislation was needed to organize and clarify the property rules for unmarried couples that live together or have children together. In 2018, with the participation of the Alberta Law Reform Institute and members of the family bar (this author included), the Legislative Assembly of Alberta passed the Family Statutes Amendment Act in December.
Now under the newly named Family Property Act, unmarried couples can find themselves under the same default rules as married couples: everything accumulated during the relationship is family property, giving both people equal rights and a 50% cut when the relationship ends (common law property is now treated the same as matrimonial property).
So, What do you need to know?
Start Date Delayed: There is a grace period provided by the government before the rules are triggered. The new rules for partners under the Family Property Act will actually be in force January 1, 2020.
Definition of Property: Property in this context can be any asset, including homes, buildings, businesses, stocks, investments, bank accounts, RRSPs, Employment Pensions, debts, vehicles, furniture, and even pets. Any tangible asset may be divisible.
Definition of AIP: Not every romantic couple or family member is considered ‘common-law’. In fact, when it comes to family law in Alberta, the term is “Adult Interdependent Partner.” Adult Interdependent Partners are defined as two people who live together in a relationship of interdependence, being a relationship of at least 3 years, or less than 3 years if the couple has a child.
(For more information on whether or not you might be an Adult Interdependent Partner, see my previous blog post here.)
Marriage now a formality: When it comes to property law in Alberta, the Family Property Act will make marriage a formality for nearly any relationship where the couple live together for three years or longer, or any relationship where the couple live together and have a child. Whether or not you actually get married, you will have the same property rights as those that signed on the dotted line.
The Rules Automatically Apply: With marriage, there is a conscious decision to engage in a legal relationship, to sign on for the rights and obligations of spouses. With the new Family Property Act, the law is imposed on anyone who is an Adult Interdependent Partner, whether or not you actually put your mind to the consequences of the relationship. You may not realize that the decision to move-in with someone could be a decision to share your assets.
You Can Opt-Out: Like in marriages and divorces, you can contract out of the usual rules, if you and your partner agree. Often known as “Pre-nuptial Agreements”, there are many variations of a written legal agreement where you and your partner can decide how property will be dealt with if the relationship breaks down.
The best thing about these Cohabitation Agreements is that you and your partner are the decision makers. You get to decide how things will go in a way that works for both of you. In the unfortunate circumstances that your relationship ends, there will be no need for running to court, paying lawyers big money to fight, or having a stranger inevitably decide your future. You will already have a manual laying out the steps to resolve the separation.
#1 RULE: Get legal advice from a family lawyer.
I tried to provide basic information in this post, but the reality is there are complex legal principles at work and specific rules that we did not get into. If you think you might be classified as an Adult Interdependent Partner, or if you are planning on getting married, you should know the potential rights and obligations imposed as a consequence of your relationship. Even a one-hour consultation with a lawyer will provide very important advice to help you understand your legal situation and give you options on what to do.
I encourage all partners and spouses to enter into a written agreement. It requires you and your partner to communicate about your relationship, roles and expectations. It also allows you to create a smart plan for the future, diminishing future losses, stress and costs.
The key to making a written agreement legally binding is to sign with a lawyer who provides Independent Legal Advice. You may think the agreement you typed up or found online will do, but if you don’t get advice from a lawyer, it can easily be defeated in court.
We do these agreements at our office and also provide Independent Legal Advice on agreements already drafted. To take a smart step forward in planning for your future, contact us.
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