Without a ring…
Do I really need a cohabitation agreement?
As couples nowadays are less likely to “put a ring on it”, it has become important for people to discuss with their significant other whether or not a cohabitation agreement is necessary. While some may consider it awkward to talk with their partners about finances – assets and debts – it is in fact very important to have these open conversations about finances, and more importantly how you intend to manage those finances once you move in together.
What is a Cohabitation Agreement?
Cohabitation agreements are written contracts which outline the rights and obligations of non-married persons, including those who already live together or those who intend to live together in future. It is a document which allows you to set out your agreed upon rights and obligations while living together, and outlines what is to happen if the relationship ends by separation or death.
Think of a cohabitation agreement like a roadmap for the relationship. The cohabitation agreement can outline how you are to set up your finances while living together, for example what each party will contribute to the living expenses (mortgage, rent, savings, etc), and allows for clearer expectations of each party’s expected role in the finances of the couple. In the event a couple separates, the cohabitation agreement can provide for how those finances will be dealt upon separation. The cohabitation agreement outlines what each party can expect of the other, as well as themselves, in terms of finances.
The two most common items dealt with in a cohabitation agreement are:
1) Spousal support; and,
2) Property – including but not limited to division of any assets, assumption/payment of any debts, or ownership of property.
What cannot be dealt with in a cohabitation agreement are any child-related issues, including major decision making, parenting time or financial support of the child(ren).
Why have a cohabitation agreement?
In Ontario, unlike married spouses, there is no statutory regime for the division of property amongst common-law partners. Without a Cohabitation Agreement, unmarried spouses have virtually no rights to the other person’s property on separation or death — which means that you may have no rights to the person’s pension plan, RRSPs, or the home that they own.
The financial ramifications of only one common-law spouse holding title to the home and not the other can be detrimental to the spouse not on title. Many people rely upon verbal agreements while living together. Unfortunately, when a relationship ends, such agreements are very difficult to establish in court, and are time-consuming and costly to litigate.
What if I have already moved in with my partner?
While we do recommend that parties negotiate and sign a Cohabitation agreement before they start living together, it is possible for parties to enter into a cohabitation agreement after they’ve commenced cohabiting.
A Cohabitation agreement can be signed at any point before marriage, and once parties are married, the agreement automatically becomes a marriage contract (or a “pre-nup”).