If you were asked to describe common law vs. marriage, would you know the difference? Many don't, and this can lead to issues and misunderstandings down the road when it comes to taxes, financial planning, and asset division.
If you are considering living with your partner permanently, but not pursuing marriage, it will be important to understand how common law affects you. In Canada, the federal law considers couples common law after living together for one year, but different Canadian provinces have their own rules. Common law in Saskatchewan, Canada differs from common law in Alberta and Ontario, for example.
If you're living in Saskatchewan, it's important to know the province's common law definition so you can move forward with care.
Saskatchewan defines a common law relationship as partners living together for at least two years or with a child or a cohabitation agreement.
The details can get complicated, though, so this guide will teach you about Saskatchewan common law rules and how they will affect your finances.
How to Prove to CRA That We Are Common Law
If you decide to become part of a common law relationship, you will need to prove to the Canada Revenue Agency (CRA) that you meet the requirements of common law. The first point to prove is that you live together. Then, you will need to prove your intentions.
In Saskatchewan, you'll need to prove that you've been living together for two years. If you'd like to change your marital status earlier, you'll have to prove that you either have a cohabitation agreement or live with your child.
You'll also need to prove that your intentions while living together are to share in each other's lives, be emotionally committed to each other, and be financially interdependent.
This might seem hard to prove with facts, but the CRA has set rules for how you can prove these terms.
Shared Ownership of Residential Property
If you own a home together, it will be easy to prove that you live together. You can show the CRA documentation that both of your names are on the house deed and other closing documents and dated two years past.
Joint Leases or Rental Agreements
If you don't own property, but instead you lease or rent together, you can use those documents. You'll need to provide documents that include both your names as residents with the dates.
Bills for Shared Utility Accounts
You can also show that you are both sharing in the burden of expenses in some way. One good way to do this is to show documents for joint utility accounts and bills with your address and both your names.
Important Documents with Shared Address
You can also prove that you share the same primary address by providing individual IDs with the same address. You can also provide documents for insurance policies that include your name and address.
You'll also need to provide identifying documents such as a driver's license or passport to prove your identity. These IDs can double as proof of address.
How Long After Living Together Are Considered Common Law in Saskatchewan?
In Canada, the federal law only requires one year of living together, but you'll have to follow the laws of your province. Some provinces, like Alberta, require that you live together for three years.
But how long do you have to be together to be common law in Saskatchewan? Saskatchewan only requires two years.
When do you have to claim common law? You can choose to claim common law as soon as you have proof and meet the requirements, but if you don't, the province will treat you as common law after the two-year period. You'll then have to change your marital status with the CRA so that you can be taxed properly.
What Is a Cohabitation Agreement?
To speed up the process of becoming a common law relationship, you can choose to make a cohabitation agreement.
A cohabitation agreement in Saskatchewan is a legal document that outlines your intentions and rules for living together. This document proves legally that you meet the requirements for living together that would allow for a common law relationship.
Is It a Good Idea?
Cohabitation agreements do speed up the process, but they're also a great idea for protecting you and helping your relationship. Talking out your intentions and expectations ahead of time with your partner is a great way to begin your relationship living together. It will also help legally protect you later on in the case of a common law breakup.
Can I Make One Before My Spouse Moves In?
It is highly recommended that you make your cohabitation agreement before you move in together. This helps you start on the right foot and protects you legally from making mistakes with financial assets that could hurt you later.
How Much Does It Cost?
You can make your own cohabitation agreement for free, but it's recommended to at least pay for legal advice. Both parties should hire their own lawyer when writing out a cohabitation agreement. A basic agreement can cost about $500 but could be more if complications like child support and custody come into play.
Do I Need a Lawyer for One?
Both parties should hire a lawyer when writing up a cohabitation agreement. This will make sure the agreement is legally binding and will hold up in court. It will also make sure that both party's best interests are kept in mind.
What if We Have a Verbal Agreement?
As nice as it is to agree verbally, you won't be able to prove your agreement in court. You need to have a written document that both parties have signed and dated for it to hold up in court.
Do We Have to File Taxes Together?
Common law partners file taxes separately, but they do have to include information about their marital status and the personal information of their partner on their taxes. It is considered fraud to not change your marital status officially with the CRA, and you could be fined. The government will also reassess your taxes so that you pay the correct amount, and you could be denied benefits.
What If We Have Children Together?
If you have children together, you will have to both file your taxes separately and the CRA will link your accounts together. They will take into account that you are common law and reassess your child-related benefits. However, the partner who has the lowest net income is the one who must claim child expenses.
What Not to Do in a Common Law Relationship
Certain laws attempt to protect partnerships in the case of one partner not fulfilling their responsibilities. The Partnership Act in Saskatchewan, for example, helps business partnerships to set expectations for roles and protect profits when divided among partners.
This law can come into play for common law relationships that also involve business partnerships. It's important to apply similar rules to your relationship to protect your financial assets and children.
If your relationship falls through, but you didn't take the necessary steps to legally outline what should happen in the case of a separation, children can be exposed to trauma and disarray.
What Is My Partner or Spouse Entitled To?
The Family Law Act in Saskatchewan outlines what partners within a common law relationship get in case of separation. Saskatchewanian couples must divide the property in half, regardless of who originally owned the property.
Because of this law, partners cannot walk away with assets without a fair negotiation. If the cohabitation agreement outlined who would take what, you must follow it. Otherwise, partners can argue for a fair split down the middle.
Not all assets can split physically, like houses and cars, so partners must be financially compensated in another way to make the split as fair as possible. These agreements are set with a formal separation agreement.
This law also applies to debts. Partners will be equally responsible for paying off debts, even after they separate.
What Happens if We Separate?
Common law separation in Saskatchewan can be complicated if it includes children and disputes over property. Many couples wonder if they could kick out their partner rightfully and if they will go through the same process as divorce.
Every case is different, but the Family Law Act protects common law couples from losing everything to their partner. If both your names are on the house deed, you definitely cannot kick out your spouse. In Saskatchewan, you still won't be able to kick out your partner after two years of living together, and you'll need to follow your cohabitation agreement or go to court.
This law makes separation very similar to divorce. The only difference is that you can automatically end your common law relationship just by moving out permanently. After 90 days of separation, you can file to change your marital status.
Get Your Financial Assets in Order
Now that you understand what is considered common law in Saskatchewan, you'll be able to move forward confidently with your relationship. You'll know exactly how to protect your children and your financial assets, especially in the case of separation.
Insurdinary is always offering new advice on taxes, financial assets, insurance, and more. If you need more help with your common law relationship, you can check out the blog now!