Prince Edward Island has one of the smallest populations of common law couples in Canada, but these relationships are treated much the same as married couples. Prince Edward Island common law, in fact, is a bit more friendly than many of the other provinces.
Common law in Prince Edward Island, Canada defines common law relationships as couples who have been living together in a conjugal relationship for three or more years or with a child. On the other hand, the federal law's common law definition requires only one year of living together.
If you're considering common law vs marriage, it's important to fully understand the Prince Edward Island common law rules and how they will affect your taxes, assets, and children.
Read this guide for what is considered common law in Prince Edward Island and how to fully prepare for your new marital status.
How to Prove to CRA That We Are Common Law
When you are filing for common law status, the guidelines set by the Canada Revenue Agency (CRA) will matter for tax purposes. Canada federal law sees a live-in couple as common law once they've been living together for 12 months continuously. You'll need to prove you meet the requirements to successfully change your status.
To prove that you've been living together, you'll need to provide documentation of your official residence.
Shared Ownership of Residential Property
If you own a house together, you'll be able to show the house deed. You'll need to provide the house documents that include both your names and the date that you bought the property. This should be a property that you can both prove you use as your primary residence.
Joint Leases or Rental Agreements
If you don't own property, but you have joint leases or rental agreements, you can use these documents instead. Any official leasing or rental documents with both your names listed and the date will be valid proof.
Bills for Shared Utility Accounts
If you pay for bills together, you can use bills from shared utility accounts. You can send the CRA copies of your bills with both your names listed and dates.
Important Documents for Shared Address
To show you both use the address as your primary address, you can show identification documents like passports and licenses or insurance policies that have the same address.
If you have a child together, you can prove this with the child's identification documents. You'll also need to provide your own documents to prove your identity.
How Long After Living Together Are Considered Common Law in PEI?
How long do you have to be together to be common law in Prince Edward Island? While the federal government only requires a year, Prince Edward Island requires three years of a conjugal live-in relationship or the presence of a child.
After the three-year period, the government will consider your relationship as common law and treat you as such. This means that any legal disputes, including separation, will be handled under common law rules. You'll need to claim the new status however to change it for your taxes.
What Is a Cohabitation Agreement?
If you're not happy with the protection that the law provides common law couples, you can create your own with a cohabitation agreement.
A cohabitation agreement in Prince Edward Island is a legally binding document that sets the intentions and expectations of your live-in relationship.
The law uses this document in case of disputes or separation. It should cover how your living situation is set up, expectations for child care and finances, and how to divide property upon separation. It should also set guidelines for how to care for the children, both with support and custody arrangements, in the case of separation.
Is It a Good Idea?
Cohabitation agreements are a good idea across the board because they help your partnership with predetermined expectations. A healthy relationship can be built on clear understandings. These agreements will also legally protect you in case of separation.
Can I Make One Before My Spouse Moves In?
You should make a cohabitation agreement as soon as possible, especially before you move in with each other. The contract can only protect you starting on the date it is signed, so anything that happens before that goes unprotected by law.
How Much Does It Cost?
Cohabitation agreements cost about $500 or less, but children and spousal support complications can make it more expensive. You might be able to create one on your own for free, but you should hire a lawyer.
Do I Need A Lawyer for One?
It is not required, but both parties should hire an attorney to protect their interests. Mistakes and unclear phrasing can lead to loopholes and cause problems down the road.
What If We Have a Verbal Agreement?
Verbal agreements are nice, but they don't hold up in court. To have a legally valid cohabitation agreement, it will need to be written. Both parties will have to sign and date the agreement.
Do We Have to File Taxes Together?
When you file your taxes, you must follow the CRA guidelines. The CRA requires that you change your marital status to common law once you meet the requirements so that you are being taxed correctly and receive the correct benefits.
Canadian law does not allow common law partners to file jointly. Each partner must file taxes separately and include their marital status and partner's personal information. The CRA will then calculate your household income and dispense the correct benefits.
Filing with an incorrect marital status is fraud and will cause fines. The CRA could deny benefits and will reassess your taxes.
What If We Have Children Together?
If you have children, it can be confusing to file as common law partners. Because you file separately rather than jointly, you'll need to claim childcare expenses on only one tax form. In this case, the spouse with the lowest net income must report childcare expenses.
It is important to notice that filing taxes with your new marital status can change the tax amounts and the benefits you receive. If you were originally depending on certain benefits, you should consult with a professional to find out how your financial situation could change.
What Not to Do in a Common Law Relationship
One of the biggest mistakes you can make is not understanding how your province handles common law relationships. Not understanding the details of how common law partners divide assets and settle on child support can leave you vulnerable to problems later.
If you have any property that you want to keep after separation, you should not put your partner's name on the ownership documents.
The Family Law Act sets guidelines in many provinces for how to divide property in the case of separation. It protects married couples by calling for a 50/50 division of property during divorce in many provinces.
The Family Law Act in Prince Edward Island, however, only applies to married couples, not common law couples. This means that property is not divided equally like it is for married couples. Once common law partners separate, they keep any property that they originally had before the relationship.
The law treats child support and custody, however, the same across the board. This means that you should be aware that involving a child in a common law relationship can result in legal proceedings later.
What Is My Partner or Spouse Entitled To?
In Prince Edward Island, your partner is not entitled to half your assets or your house, as it can be with married couples. In the case of a common law breakup, you part ways with the same property you entered the relationship with. The only issue will be the property that is jointly owned.
If you own the house that your partner lives in, you're legally allowed to kick your partner out. Any debts in only one name will be the responsibility of that person and not the other. Lenders are allowed to pursue payments from people whose names are listed on the debt.
You should also be aware that being in a common law relationship with someone does not entitle you to stay in the home after the death of your partner unless your name is on the title. You also are not entitled to any inheritance.
What Happens If We Separate?
Common law separation in Prince Edward Island occurs when one partner moves out for more than 90 days. Instead of divorce proceedings, common law couples can automatically dissolve their marital status with separation. Once 90 days have passed, the partners can file for a marital status change to single.
It is advised that you make a separation agreement to handle any negotiations on property division and childcare once separated.
Protect Your Common Law Relationship
Now that you understand what qualifies as a common law relationship in Prince Edward Island and what legal protections you receive, you can make an informed decision about whether to enter a common law relationship. Make sure your property and children are financially and legally protected with solid legal documents and a full understanding of the law.
Insurdinary offers financial comparison tools and educational blogs for those looking to financially plan for their future. If you are looking into common law in Prince Edward Island, or any other life change, there are tools and advice for every lifestyle. Be sure to check out the blog today!