The Companion Advisor: General Interest
Myths and misconceptions in Family Law

By Megan Pallett, Lawyer

1. Living together is "the same as" being married.

In certain situations, living together is "the same as" being married. For instance, the Canada Pension Plan recognizes common-law spouses, as do many private pension and benefit plans. As well, a common-law spouse can claim support from his or her spouse if their relationship ends, as long as the couple had lived together for three years. The couple must have lived together for 1 year to be considered "spouses" for the purpose of the Income Tax Act.

There is, however, one very significant right which common-law spouses do not have. That is the right to obtain an equal division of property on the termination of the couple's relationship. As many people are aware, with a few exceptions, a married couple must share equally the value of all property they acquired during their marriage. A common-law spouse does not have this automatic entitlement to an "equalization payment". In certain cases, if the common-law spouse sacrificed his or her time raising the couple's children, or helped to build up the assets of the other spouse, a claim could be made for compensation for this sacrifice or contribution.

2. If my daughter inherits my estate, her husband could get half of it if their marriage failed.

Inheritances are one of the few assets which are not subject to being "divided" on marriage breakdown. If the daughter had all or part of the inheritance left when she and her husband separated, her husband could not make a claim to it. The exception to this rule would be where the daughter used the inheritance to buy a family home or cottage, or to pay down the mortgage on the family home or cottage. Neither should the daughter put part of the inheritance into a joint account with her husband. In those cases, the special status of the inheritance would be lost and the value of the house or cottage would be shared equally with the husband, regardless of the fact that much of the value was obtained through the inheritance.

3. I cannot get a divorce until everything to do with property, support and the children has been finalized.

Resolving all of the issues surrounding a separation can, at times be a long process. Even if these other claims are unresolved, a divorce can still be obtained after one year from the date of separation.

4. These days, no one should get married without a Marriage Contract.

A Marriage Contract can be drafted to completely change the rights or obligations a husband or wife would otherwise have on marriage termination. A Marriage Contract is not necessary or helpful for every couple. Many couples, particularly those starting out with little property, would agree that everything either of them acquire during their marriage should be the property of both. Some situations where a Marriage Contract would be advisable are the following: (a) The couple is entering into a second marriage and one or both of the spouses wish to have Wills drawn up, leaving most of their property to someone other than their future husband or wife, such as to their own children from prior marriages. (b) One spouse owns a home or cottage in which the couple will be residing together. (c) One spouse has, or will have, significantly greater assets than the other spouse. A marriage contract can be particularly important if the value of the assets are anticipated to increase significantly after the marriage or if the asset is a business.

5. The Courts will "punish" the spouse who leaves the marriage or commits adultery by awarding less property or support, or by denying custody of the children.

Prior to 1978, it was very important to determine who was "at fault" for the breakdown of a marriage, and a finding of fault could negatively affect all of the above claims. This is no longer the case under current Ontario law. Whether fair or not, the conduct of a spouse during the marriage will not affect his or her entitlement or rights.

6. If my business partner and her husband separate, he will become the owner of one-quarter of our business.

A separating spouse has the right to claim one-half of the net value of all of the property the other spouse acquired over the marriage. The spouse making the claim must, of course, account for the value of the property he or she acquired over the marriage as well, so that their properties can be "equalized".

The business partner here will have to account to her husband for the value of her interest in the business. The husband does not actually acquire half or any of the wife's interest in the business. His rights are limited to ascertaining the value and requiring his wife to make the resulting "equalization" payment. As long as the wife is able to fund this payment from other sources, the business should not be affected. Difficulties could arise, however, if no other assets were available to satisfy the husband's equalization claim. In most cases, the separation of the business partner from his/her spouse would not directly affect the business or the ownership of the business.

In some cases, it might be advisable for business partners to seek further advice. These include situations where:

1. the spouse has been a shareholder, officer or director;
2. the spouse has been directly involved in the running of the business, even if this occurred years ago;
3. the spouse has contributed financially to the business, including providing guarantees on business loans or pledging the family home as security; or
4. the business interest is the only, or the most substantial asset belonging to either of the partner and his or her spouse. It should also be stressed that if one partner's marriage is terminated not by separation, but by the death of the partner, other considerations do apply and some early planning in this regard is advisable.

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