The idea of a couple’s Financial Agreement when you aren’t married might seem a little ridiculous. Maybe one of the reasons you haven’t gotten married is because you’re not ready for a formal financial agreement between the two of you.

That’s fair, but hear us out. A properly drawn up financial agreement can save you a world of trouble and heartache down the road. It doesn’t commit you to anything you aren’t ready for, but it does provide a useful complement to your cohabitation agreement by laying out the guidelines for how you’ll handle your finances while you’re together.

And besides that, a financial agreement will provide the answers to any difficult questions that may come up in the event that your relationship ends. It’s much easier to make those decisions now, while you’re still on the same page, than it will be during a painful breakup.

What is Common Law in Ontario?

First of all, it’s important to be fully aware of the limitations of common law, because there is a wealth of misinformation out there. Contrary to popular belief, common law relationships are not the same as marriages. You’re probably thinking, “Well, of course not” – but what you may not realize is that in a common law relationship, there is no property equalization and no automatic inheritance rights. What this means is that you are not entitled to a share in any property that your partner owns, and in the event of your common law partner’s death, you will not be an automatic beneficiary of the estate. In order to properly provide for each other, you’ll need to specifically name each other as beneficiaries, as well as adding each other’s names to any property you want to share.

What Does a Couple’s Financial Agreement Cover?

Now it’s time to get into what a couple’s financial agreement actually provides for. This is not the same as a cohabitation agreement in Ontario, which deals with asset division in the event of a breakup. While a financial agreement does cover some of the same ground, it also specifies how you’ll handle your finances while you are living together. This document answers questions such as:

• How do you want to share or divide your finances while you’re living together?
• How will you divide any joint property if you break up, including homes, cars, pensions, or investments?
• What is the current state of the finances of both partners at the beginning of the relationship?
• Who is responsible for any shared debts in the event of a breakup?
• What financial provisions will you make for any children you may have together or children from previous relationships?
• How much will be paid in spousal support if the relationship ends?

In addition to answering the big questions, this document can also include practical aspects of your day-to-day finances, such as:

• Will you have a joint bank account, or maintain separate ones?
• Will you have any joint credit cards or loans?
• Who will be responsible for the bills?
• How will rent or mortgage payments be shared?

One reason why it’s a good idea to draw up a financial agreement is because this is a golden opportunity to learn each other’s approach to financial management. You may find that you have wildly different approaches to handling your money, in which case it’s even more important to draw up an agreement that both of you can stick to. You’ve probably heard the saying that the biggest fights couples have are about money – well, we’re here to tell you that is true! Make each partner’s expectations and obligations as clear as possible to help resolve arguments before they happen.

It’s also a good idea to delineate each partner’s financial autonomy. A common setup for cohabitating couples (and even married couples) is for each partner to keep their own bank account in addition to the joint account (if you choose to have one). Many people appreciate having their own money that they don’t have to explain or be held accountable for. This doesn’t mean that you have anything to hide; plenty of people simply prefer to have some funds that they don’t have to share with anyone.

Keep in mind that your finances will change over time, so it’s a good idea to review your agreement every five to seven years to make sure it hasn’t become obsolete. Your lawyer can help you keep your financial documents up to date.

Preparing a Couple’s Financial Agreement

So how do you go about drawing up this important document? This isn’t something you can scribble on a napkin and keep in a desk drawer; it’s a legal document and therefore should be written very carefully.

The first step is to sit down with your partner and try to outline a basic plan. Talk over all of your debts and assets and put together a complete financial picture. Both of you need to be completely honest about your finances; don’t try to hide anything or it could very well come back around to cause trouble later.

While you’re doing this, talk over your financial goals and expectations. You might find that that the two of you have completely different ideas on how to handle your money. This is not necessarily a problem as long as you understand each other and find a way to make a financial plan that is satisfactory to both of you.

Write up a preliminary outline, then take it to a lawyer to draw up a formal couple’s financial agreement. Each of you can even review it independently with your own lawyers to make sure your own interests are being represented.

Galbraith Family Law Can Help You Both

If you’re thinking about moving in with your significant other, give Galbraith Family Law a call. We can help you draw up a couple’s financial agreement as well as a cohabitation agreement so that you can find solutions to problems before they arise. It may seem unnecessary, but it’s never a bad idea to find common ground while you’re on good terms rather than try to solve financial problems during an argument or a painful breakup. Our lawyers have plenty of experience assisting cohabitating couples and will be happy to advise you.

If you’re in Newmarket, call us at (289) 319-0635; in Barrie, call (705) 727-4242.You can also send a message through our website.

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