Yes! This is the trend of a growing number of 50 and 60 year olds.
Living together is increasingly the choice of the growing 50s and 60s crowd.
The most recent census figures suggest that older couples have little incentive to get married. There are big increases in the number of people over 50 in common law unions, with the most significant growth in the early 60s crowd. At the same time, the practice is in decline among the 20 and 30 age group.
As a result of more liberal social attitudes together with the lack of financial incentive, a larger number of divorced or widowed persons, including many older Canadians, have chosen simply to not marry.
Between 2001 and 2006, the most recent year for census data, the number of Canadians in common law relationships shot up 77 percent among those aged 60 to 64 and between 44 and 62 percent for all other age groups over 50.
Cohabitation implies sharing a residence with a partner and the enjoyment of each others’ company.
Before entering into such an arrangement, people should make themselves fully aware of all the benefits and pitfalls of this decision. I do not intend to pass on any moral or religious comments about this arrangement, simply the issues that should be analyzed before one enters this kind of relationship in order to be fully informed.
The most important thing to undertake at the beginning of the relationship is to enter into a formal cohabitation agreement properly prepared by a lawyer experienced in family law. This agreement contains the rules and regulations, so to speak, that both parties agree to abide by during their cohabitation.
Briefly, the agreement should contain details with respect to property ownership, debt obligations and support payments in the event that the arrangement results in a breakup.
In the event that a breakup occurs, it will be necessary to look to the cohabitation agreement in the form of a separate Spousal Support Agreement which must be in writing.
For Income Tax purposes, the amounts payable must be on a periodic basis in order to be deductible by the payer.
In order to obtain spousal support under Family Law Reform, the parties must have lived together for at least 3 years or have had a child together.
For income tax purposes, in order to be claimed as a dependent, the parties are deemed to be equivalent to married if they have cohabitated for at least 1 year.
One item that cannot be covered with this cohabitation agreement is property equalization which under the Family Law Reform Act , is available only to legally married couples.
In addition, if one party owns the home in which the parties reside, the owner can mortgage or sell the property without the other party’s consent. This in itself could cause a conflict.
Here are some reasons why not to marry but to enter into a cohabitation arrangement:
1. Marriage is not financially practical.
2. Tax disincentives.
3. Loss of pension benefits.
4. Loss of health benefits.
5. Fear of incurring liability for partner’s liabilities.
6. Fear of being affected by partner’s credit defaults.
7. Fear of marriage relationship failure.
8. Concerns for children’s inheritance.
There are a number of matters that a cohabitating couple should do to protect each other:
1. Update their wills.
2. Update their powers of attorney both for health and property. Make sure to clearly provide information as to decisions relating to health care matters. Be sure to discuss this with their children.
3. Long-Term Care Insurance is a MUST.
4. The couple should talk about insuring each other if this is practicable.
5. Keep all financial assets separate except for household or common expenses, which should be in a joint account with only minimal amounts of monies, enough to pay the month’s expenses.
6. Involve respective children in a “Family Care Conversation”, perhaps separately if one prefers, in order to make the children aware of decisions and to discuss intentions as to how to resolve the matter of their inheritance(s).
7. There are a number of concerns about Family Law Reform for which the couple should seek legal advice. For example, if one party has a successful business and wishes to do an Estate Freeze to limit the growth of that party’s estate, care must be taken to ensure that due consideration is taken of this statute.
Under the Federal Income Tax Act, the following are some of the concerns that should be addressed:
1. Ensure that both parties file all necessary elections and designations as required under the Federal Income Tax Act.
2. Joint election to prevent capital gains attribution.
3. The parties should also be aware of the tax-free rollover status to a common law spouse of their RRSP of RIIF. This should be part of any cohabitation agreement.
4. For recognition of Common Law status under the Federal Income Tax Law, there must be a continuous relationship for at least 12 months, and if interrupted, status will not take effect until another continuous 12 month period has been established.
5. To be considered a common law relationship, one year is considered a sufficient length of time for Income Tax purposes but for Family Law Reform the period is three years.
6. Election that tax-free rollover provisions NOT apply.
7. Matrimonial home designation.
As you can see, marriage is not for everyone and with careful planning, a common law relationship can bring a rich and fulfilling life for seniors in their later years.
