Helpful Estate Planning Tips

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Common Law Couple

Estate Planing Tips for Common Law Partners in Ontario, Canada

As per Statistics, the number of Canadians living as common-law partners, divorcing and remarrying is rising much more than before. In such circumstance, second time married or common-law couples have a diverse set of challenges as compared to one-time married couples. Estate planning in this situation can be quite complex.

Recent surveys on Wills show that more than 50% of Canadians do not have a will. Dying and making a will are topics that most people do not like to discuss. But, it is one of the essential things to take care of when your relationships and their dynamics change with time.

Many common-law couples keep their financial assets separate and manage them independently. They may also have a different set of expenses, incomes, and assets that they bring in to the relationship. Their financial setup for a former spouse, child support, expenses for children from an earlier relationship can be different.

Holding Real Estate

Many common-law couples choose to hold in real estate as tenants-in-common. In circumstances when they have children from earlier relationships, this type of real estate holding tends to be more common. As a tenant-in-common, each party has an individual interest in property. They can choose to transfer their vested interest to the person they select.

Let’s consider a situation where a common law couple holds property together as tenants-in-common and one of them expires. As per their will, the expired partner transferred their share to their respective children. Now, the child may become a co-owner with their step-parent leading to an awkward situation.

Such a situation differs from a joint ownership structure. In a joint tenancy, the survivor becomes the sole owner when the other owner expire, by right of survivorship.  There can be many ways to deal with such a situation.

One way is to modify the will’s clause giving permission to the surviving partner to stay in the home for a pre-set time period. In this case, they will be able to mourn their loss properly and not be forced to sell the house.

A clause for managing expenses in this situation should also be built into the will. If the surviving partner wishes to purchase half the home from the deceased partner’s children, that should also be addressed.

To manage this, two independent appraisals can be done to maintain a consistency in valuation. The purchase price can be the middle point of the two appraisals. For clarity, a real estate commission based on the prevailing rate in the province can be included in the calculation.

Benefits to the Survivor

When couples have children from previous relationships, they need to create a perfect mix of inheritance to all parties. This needs to be done according to the minimum inheritances and family law requirements of the province of residence.

Bequeathing all your assets to your surviving partner may not be the best situation when they are a step parent to your children. They may end up gifting assets in their life to people of their choice or may bequeath the assets in their will in a manner you may not prefer. If they get into a new relationship after your death, the new dynamics may change asset distribution.

The perception of your children for your surviving partner may also change if you leave everything to your partner. Another situation may occur if you fail to provide sufficiently for your surviving partner. They may have less than a happy retirement due to insufficient funds. They may also feel the need to work more into their retirement to ensure financial security.

Hence, it is vital to think through all possible situations before actually distributing assets to your family.

Incorrect Assets Distribution to A Survivor

Certain assets are more convenient if transferred to a surviving spouse or common-law partner instead of children. Registered Retirement Income Funds (RRIFs) and Registered Retirement Savings Plan (RRSPs) are easier to transfer to a common-law partner or spouse on a tax-deferred basis upon death.

These assets become fully taxable if they are payable to children, upon death. The only exception here would be a dependent grandchild or child who is dependent upon the expired spouse, had an income under minimum thresholds and was living with them.

Similarly, a Tax-Free Savings Accounts (TFSAs) can be transferred to a surviving partner. It can be done without adversely affecting the existing TFSA room to invest more. When it is transferred to any beneficiary that is not a spouse, it becomes taxable.

Though taxability is just one concern for bequeathing assets, it is an important one in your estate planning exercise.

With second relationships and marriages becoming increasingly common, it is vital to address these issues before they crop up. Acknowledging and providing for these circumstances will help in taking care of those you love the most.

How We Can Help

It is recommended to discuss and understand your options with a knowledgeable and experienced Wills and Estate Lawyer. If you require legal advice for making a will, please call us today. At Nanda & Associate Lawyers, our experienced Wills and Estate lawyers understand your specific circumstances and provide tailored and customized solutions for each of them.

Our Wills and Estate Planing Lawyers are available for a no-obligation free consultation. Feel comfortable interacting with our caring team who speak more than 15 languages like English, French, Spanish, Italian, Portuguese, Albanian, Hindi, Punjabi, Kannada, Telugu, Tamil, Bengali and much more.