ASK THE WOMAN FOR MONEY: It’s clear: a contract to live together is not the same as a prenuptial marriage

Dear Money Lady Readers:

My eldest son recently said he was moving in with his girlfriend after 14 months of dating to save money together for their future – without a ring or a proposal.

I was quite surprised by this announcement as I am definitely an old school mom who thinks you should be married or at least engaged to live together.

But, trying to be more worldly, I’ve adjusted my archaic dinosaur ways to now realize that this happens all the time with millennials all over the world. Today, a marriage certificate, for some of our young Canadians, is just a piece of paper.

But, as a lifelong banker, I’m inclined to put my two cents in with my son, because a new co-living relationship always requires a transparent plan between both parties and a detailed discussion to deal with the new set of responsibilities. unique financials that eventually come.

So today we are going to talk about cohabitation agreements – a contract that is very different from a prenuptial agreement of marriage.

I’ve written about premarital marriages before for readers who want to remarry with more than “love and school debt.” Prenuptial agreements are extremely beneficial for comprehensive estate planning to protect finances, property, children and/or dependents. They are also necessary to outline a succession at death or a possible future divorce.

To protect Canadians, I’m much more interested in what will happen if a partner dies and to make sure that if you have a marriage contract, you make sure it’s in accordance with your will.

Please keep in mind that prenups can and do override wills.

Agree to live together

So what is a cohabitation agreement and why do you need one?

A cohabitation agreement is a domestic contract. It is not the same as a marriage contract. Like all domestic contracts, it should not be seen as a lack of love or future commitment to your new partner, but rather your conscious need to define how your finances and property will be shared or divided in the event of separation. or death, according to your wishes and intentions, and not according to provincial laws.

Currently, cohabiting partners have very few property rights compared to married couples. As a general rule, the property you bring into the relationship, plus any increase in its value, generally continues to be yours alone. This would include investment assets, registered accounts, real estate or personal property.

Being proactive and open with your partner helps form the foundation for future financial planning – something that should be thought out to protect all parties financially and ultimately eliminate any uncomfortable future consequences.

The main reason for writing a cohabitation agreement is to provide for a division of property in the event of a relationship breakdown. The simplest way is to declare that all property remains the property of each individual and to provide in the contract for a separation of property regime. This means that all property, including assets owned before cohabitation, plus any increase in value, and all property acquired during the relationship is held strictly by title.

This type of domestic agreement is very different from a prenup and is generally not ideal for every long-term partner. That being said, cohabitation agreements are not as rigid as marriage contracts and contracts can be drafted with more freedom and/or creativity depending on the particular conditions and circumstances each party finds themselves in when they begin his union.

Since provincial laws vary across the country, it is essential that relevant provincial legislation be reviewed when planning a major lifestyle change. Being proactive and open with your partner helps form the foundation for future financial planning – something that should be thought out to protect all parties financially and ultimately eliminate any uncomfortable future consequences.

Good luck and best wishes.

Written by Christine Ibbotson, Canadian financial writer, radio host and YouTuber. For more tips, check out her YouTube channel: ASK THE MONEY LADY – Your Canadian Finance Coach.