The Evolving Definition of “Spouse”
Barbara Kimmitt
Common law relationships (that is to say,
marriage-like relationships between persons
of the opposite sex) have been commonplace
in Canadian society for some time, but it has
only been in the last few years that our Courts
have recognized these relationships. Even
slower to respond have been our legislators,
at both the provincial and federal levels. As a
result, until recently, people living in a common
law relationship in Alberta did not enjoy any of
the legal rights afforded to married persons.
On the other hand, while they may not have
enjoyed certain rights (such as the right to
share in the estate of a deceased common law
spouse) nor were they burdened with any of the
obligations that come with those rights. Recent
Court decisions and changes to our federal
laws mean that rights previously enjoyed only
by married persons are now being extended
to unmarried persons. At the same time,
obligations of married persons to each other,
are also imposed on common law spouses.
Not only do these changes broaden the traditional
meaning of spouse to include relationships of
unmarried people of the opposite sex, they
also include same-sex couples. It is now more
important than ever for Albertans from every
kind of family structure to recognize how the
laws will apply to their situation and to plan
accordingly.
What are the changes?
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Since 1993, the federal Income Tax Act
has applied to heterosexual common law
relationships of at least one year duration.
Therefore, as an example, upon the death
of one of the spouses in a common law
relationship, the surviving spouse can receive
the deceased’s RRSPs on a tax-deferred
roll-over basis. On the other hand, during the
lifetime of the couple, they can only claim an
exemption on the sale of one principal residence
at any one time. Before the amendment to the
legislation, the estate of a deceased commonlaw spouse would have to pay considerable tax
if the RRSPs were gifted to the survivor (or, with
a few exceptions, anyone other than a married
spouse). On the other hand, the same couple
could potentially have claimed two principal
residence exemptions prior to the amendments.
With rights come obligations.
In mid-2000, the federal government passed
Bill C-23 resulting in the Modernization of
Rights and Obligations Act. This legislation
amends the definition of “spouse” contained
in approximately 60 federal statutes to include
conjugal relationships of at least three years
duration between persons of the opposite sex,
and same-sex couples. Therefore, on a federal
level, many laws now apply to common law
and same-sex couples to the same degree
as they apply to married couples (one notable
exception is the federal Divorce Act: same-sex
couples are still not permitted to marry).
Provincial legislators have not yet gone as far as
federal legislators. As a result, people in common
law relationships who wish to enjoy certain rights
afforded to married persons have looked to the
Courts for help. Recently, a decision by the
Court of Queen’s Bench of Alberta determined
that the legislation governing the estates of
people who died without a Will (the Intestate
Succession Act) is unconstitutional because
it treats married spouses differently than
unmarried spouses. Other Court applications
are sure to follow unless the legislators
respond. And their response is inevitable.
British Columbia has already amended most of
its provincial legislation to include common law
and same-sex couples. A recent decision by
the Supreme Court of Canada has forced the
Ontario government to change its legislation
which governs the division of assets on the
break down of a relationship.
In addition to the Intestate Succession Act,
there are a variety of Alberta statutes involving
estate planning that will likely be effected by the
evolving definition of “spouse”. These include
the Family Relief Act (which would allow a
common law or same-sex partner to apply to
the Court for an Order varying the terms of
the deceased partner’s Will so that it properly
provides for the surviving partner), and the
Matrimonial Property Act (which would give to
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The Evolving
Definition of
Spouse
a common law or same-sex partner certain property rights
over the other partner’s assets.) As a result, it is essential that
people in any relationship of some permanence take some
time to actively plan for the future division or distribution of
assets.
How does this effect the entrepreneur?
All people, whether entrepreneurs or not, should realize
that the changes, or impending changes, to the definition
of “spouse” mean they should consider whether some
succession planning is in order. This is especially the case
if you are in a common law or same-sex relationship. Until
now, you may have felt quite comfortable with the knowledge
that unless you specify otherwise, your common law spouse
is not legally entitled to any share of your estate, including
your business interest. With the anticipated changes to the
law, some of the possible effects would be as follows:
• If you die without a Will, your common law spouse
could be entitled to the first $40,000 of your estate,
and the balance would be shared between your
common law spouse and your children if you have
any. If your estate consists of a business interest,
your common law spouse could be entitled to all or
some of that asset, depending on the value.
• If you leave a Will which does not include your
common law spouse (or leaves him or her only part of
your estate), on your death, your common law spouse
could make an application in Court against your estate
for a share (or a larger share) of your estate.
• If your common law relationship breaks down, your
common law spouse could claim an interest in your
property.
Even if you are not in a common law relationship, you should
consider whether any of your business partners, or family
members are in a common law relationship. For example,
if the other 50% shareholder ofyour small business has a
common law spouse, you may have previously thought that
a unanimous shareholders agreement was unnecessary.
Now, you may want to ensure that on death, shares cannot be
transferred to that spouse, but instead can be repurchased
by you or the corporation. Similarly, if your children have
common law spouses, and you want to ensure that any
inheritance you leave to your children does not pass to that
spouse, you may want to consider establishing before and
after death trusts in favour of your children.
What can be done?
With the anticipated changes to the law, it is more important
than ever that persons who are in common law or samesex relationships have a Will (and they should also have
an Enduring Power of Attorney and a Personal Directive in
place). If there are other dependants (such as minor children
or disabled adult children from a previous relationship), you
must weigh your legal and moral obligations to all parties. It
would be well advised to consult with your lawyer to discuss
what those obligations may be, and how they can best be
met.
For example, because your common law or same-sex
partner may have a claim against your estate under the
Family Relief Act, you may want to consider purchasing
some life insurance and designating your children as
the beneficiaries. When you designate a beneficiary, the
proceeds do not form part of your estate and therefore
would not be available to your spouse as part of that
claim. Alternatively, you may want to transfer assets to a
trust intended to benefit persons other than your spouse.
Establishing a before death trust requires the involvement
of your lawyer and your tax advisor.
As a final suggestion, you should also consider having a
cohabitation agreement in place to govern how your assets
are to be divided in the event the relationship breaks down.
Such an agreement could also address whether or not
support is to be paid by one party to the other, and whether
or not the parties would have a claim under the Family Relief
Act against the estate of the other in the event of death.
Although people are not bound by a waiver of their rights
under the Family Relief Act, an agreement indicating the
parties, intentions would be relevant in determining whether
a claim under that legislation is successful.
In any case, the constantly changing definition of “spouse”
means that people in all varieties of permanent relationships
need to address the fact that the law is evolving and they
should be prepared for it.
Disclaimer
This article should not be interpreted as providing legal advice. Consult
your legal adviser before acting on any of the information contained in
it. Questions, comments, suggestions and address updates are most
appreciated and should be directed to:
Edmonton 780-423-3003
Calgary 403-260-8500
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