Golden Girl Finance | May 5th, 2010

That song had it right...breaking up is hard to do. But it’s infinitely harder when you add ‘shacking up’ to the equation. Suddenly, though you were too cautious to take the marriage leap (and for good reason if you’re now in break-up mode), you may still have to take on the woes and financial costs of a divorce. And while this can be a good thing in divvying up assets if you were in a very long-standing relationship, it can be more of a hassle if you never really considered yourself the non-celeb versions of Susan Sarandon and Tim Robbins.  In most cases, you just want to get out of the whole common-law thing quickly, efficiently and without too many tears or tirades. Here’s how.

'Living in sin' is the new 'til death do us part'

Living together is a growing trend in Canada. According to Statistics Canada, the number of common-law couples is growing at 16 times the rate of marriages. In fact, the 2006 Census revealed that 18.6% of Canadian couples are living common-law. That compares to only 7.2% twenty years ago. These latest numbers indicate that for the first time ever, there were more unmarried people in Canada than married people.

Relationship rules of governance

And as with most relationships, there are rules of governance. As such, when it comes to divvying up a common-law couple's assets in the event of a break-up, there are varying laws and regimes that determine what rights you have.

For example, a Supreme Court of Canada's 2002 ruling said that common-law couples breaking up don't have the same financial or property rights as divorcing couples. Instead, their rights are usually limited to the actual financial contribution they made to the partnership. If the couple bought something together, it will have to be divided. However, if they bought things individually, they are typically theirs to keep.

On the other hand, the federal government considers couples common-law for tax purposes if they were living together for the previous year. This could affect certain tax credits. Some federal legislation such as the Canada Pension Plan accommodates common-law partnerships but most provinces do not. And, in fact, provincial laws about common-law rights vary across the country. For example, the Ontario Family Law Act says a couple is considered common-law and can seek spousal support only after living together for three years, or as soon as you have a child together. In British Columbia, under the Family Relations Act, you are not living common law if the relationship is less than two years long.

Long-term thinking

Common-law living is all well and good, but if you plan to be Goldie and Kurt for the long-term (as in, you don't need a paper to pronounce your love for each other!), do a little preliminary planning. Sit down with a financial advisor once your relationship has proven the test of time and you start to consider buying a home, property, and other assets together, especially if one of you is the primary breadwinner. You need to discuss your legal rights should anything ever come between your love. While you may think otherwise, common-law relationships break up four times more often than marriages and you want to make sure you're protected and can move on in a position of financial stability. As Jon Bon Jovi sang in his aptly titled song 'Living in Sin'...

"I don't need no license, to sign on no line. And I don't need no preacher, to tell me you're mine, I don't need no diamonds, I don't need no new bride. I just need you, baby, to look me in the eye."

Hmm...no diamonds. Well, it may just be us, but this screams of you supporting him. Love is one thing, but you have a legacy of your own, honey. Make sure you protect it.

This article was modified with permission from the writing and expertise of Terri Williams, CFP, Vice President, Marketing and Brand Management, Global Wealth Management and Commercial Banking at Scotiabank.