Persons living or plan on living together in a common law relationship may choose to enter into a domestic agreement to set out their support and property rights and obligations. The law does not provide property rights to common law spouses on the breakdown of their relationship. Instead, any property accumulated during the course of the relationship is presumed to be owned by the spouse whose name is on the title or bill of sale. The presumption is defeated if the other spouse shows evidence that it should be ignored. However, in long term common law relationships, where most of the property has been accumulated in one person's name, the court will often ignore this presumption and declare that a share of the property is held in trust for the other partner.
A cohabitation agreement assists in avoiding confusion and disputes regarding property division. It can specify certain money or assets not available to be divided on separation. For example, if one spouse advances a large sum of money for a down payment on a home to be jointly owned, a cohabitation agreement can specify that, in the event of separation, the down payment can be returned to that spouse in full before the sale proceeds of the house are divided. This is merely one example of how a cohabitation agreement can protect the interests of both parties in a common law situation.
There are a number of reasons why people getting married may wish to enter into a contract prior to the wedding, or even at some point during the marriage. For instance, one spouse may have substantially more assets or more debts than the other. One of the parties may be involved in a business venture which is exceptionally risky, or may be a shareholder or partner who needs to protect other shareholders and partners in the event of a break up of their marriage. When individuals get married for second and third times, they may have accumulated assets which they wish to protect or have available for the children of their first marriages. In all of these examples, a prenuptial or marriage agreement can be used very flexibly to suit the particular purposes of the couple.
Some matters cannot be dealt with in prenuptial or marriage contracts. For example, while a marriage contract can address issues regarding the right to direct the education and moral training of children, it cannot deal with matters depicting the right to custody or access to children. Further, a provision purporting to limit a spouse's right to possession of the matrimonial home is unenforceable.
Virtually every separated couple that does not litigate to the point of a court order and has anything which requires settling due to their separation will likely end up having a separation agreement. Separation agreements are legally binding and deal with all rights and obligations arising from the relationship and its breakdown, usually on a permanent basis.
Separation agreements are a preferred way of dealing with matrimonial issues for a number of reasons:
- they are far less expensive than proceeding to court;
- they take far less time than proceeding to court;
- they can be tailor made for the particular needs and requirements of the parties;
- they can provide more flexibility than a court order; and
- they allow the parties to avoid the stress and animosity that so often accompanies the adversarial nature of a court proceeding.
As well, the parties can narrow some of the issues early on by way of a separation agreement thereby putting in place arrangements that benefit all parties until the court makes a final determination.
A separation agreement can be negotiated at any time, even if the matter is before the court. It will be of greatest benefit if canvassed early on in the process and should always be discussed as a possible resolution.