New Estate Rights for Common Law Spouses

Could you be in a joint family venture?

Diane was a common law spouse suffering because of a broken promise. She came into my law office looking for help. She had lived with her common law spouse, Fred, for 14 years. They shared the purchase price of their new home 50/50. They had made promises to each other.

Diane told me about Fred’s promise to her:

“Fred and I agreed. Whoever lived the longest would get the house. That means the survivor inherits the house. Our lawyer said that promise was written into the deed of our home. It was registered so we owned it jointly with rights of survivorship.”

However, when Fred died Diane was totally surprised.

Fred had done three things:

1. He had changed the deed to the property without her knowledge and permission. He did this to cut off her survivorship rights. He registered a new deed to sever the joint tenancy. Now Diane would no longer get the house automatically when Fred died.

2. He had changed his last will, leaving his half of the property to a stranger. At least she was a total stranger to Diane. To Fred, she was Norma the bus driver. Years ago she drove the bus Fred took to work.

3. He had changed his bank account to be joint with Norma. That meant that she would automatically inherit over 100,000 in the account when Fred died.

“Why did Fred do this to me?” Diane asked.

Diane still owned her 50% of their house. Fred had severed the joint tenancy so he owned the other 50%. He could do this without Diane’s knowledge or consent.

Then, Norma’s lawyer wrote Diane telling her Norma owned half the house.  The lawyer wanted Diane to pay rent on half the house. Norma’s lawyer asked for $1500 a month until the house was sold.

Common Law Spouses Have No Automatic Inheritance Rights

In Ontario, Diane could inherit only what Fred had gifted her or left her in his will. Even though Diane thought she was married to Fred, the law did not treat her as if she were married. In Ontario, that meant Diane had no statutory rights to inherit any of Fred’s property.

Diane was shocked.

Looking for answers to Fred's strange behavior Diane told me that:

• Fred had been hospitalized because he had been falling down

• He was mixing pain killers with alcohol

• He failed his driver's exam and had lost his license

• He started taking the bus everywhere

• He signed the new deed and will in the hospital before he died

As a common law spouse, Diane did have statutory rights to support. She could apply as a dependent for support from Fred’s estate.

Legal Strategy for Estate Dispute

I helped Diane formulate a legal strategy. Diane went to court to:

1. Set aside the transfer that severed the joint tenancy. She claimed that Diane and Fred were partners. They had a fiduciary duty to one another not to break any promises.

2. Contest Fred's last will. She claimed Fred was cognitively impaired at the time he made the will. If, at the time, he lacked testamentary capacity, then the court could say Fred's previous will was valid. In his prior will, Fred left all of his property to Diane.

3. Ask the Court for support as a dependent under the Ontario Succession Law Reform Act. This would include asking for temporary possession of the house until trial on a rent-free basis. As a common law spouse, Diane could obtain support from Fred's estate if she was in need.

In the absence of any statutory rights to property as a common-law spouse, Diane had no choice but to go to court. She would have to prove her case before a judge.

Unjust Enrichment Claims

The Supreme Court of Canada had not rendered its decision in the Kerr case until 2011. This was after Diane’s case began. The Kerr case creates a new template for common law spouses’ claims to property. If there is no statutory remedy, the court has stated, then common law spouses need to use the law of unjust enrichment.

The courts have said domestic and spousal services can be used to make a claim for restitution. If the court finds unjust enrichment, it could award Diane a monetary payment. It could transfer Fred's half of the home to her in settlement.

The Kerr decision also created a new concept that could help Diane. It is called a “joint family venture.” If the elements of a joint family venture are proven, which I will explain in a moment, Diane could obtain additional compensation.

What is a Joint Family Venture?

This is a new concept that domestic partners must understand as it grants significant rights to rectify any disproportionate accumulation of wealth. In a joint family venture, partner A shares partner B’s property, even when the property is in B’s name.

Kerr v. Barron – New Rights for Domestic Partners

This 2011 Supreme Court of Canada case explains the joint family venture.  Courts can use this new concept to resolve property disputes between domestic partners.

The court considers many factors to establish that a joint venture exists. Here are the four headings:

1. mutual effort – the court would consider collaboration, pooling efforts and resources, team work in dealing with children and joint contributions;

2. economic integration – factors include a “common purse” or joint bank account showing either independence or integration of finances with priority of the family unit over individual welfare;

3. actual intent – this can be expressed or inferred from evidence that the court must consider.

A joint family venture may be inferred by a court where parties:

i. treated themselves as married

ii. represented themselves as married to the public

iii. lived in a lengthy, stable relationship

iv.  held title jointly or if alone showed little concern for accounting

v. made plans, like a will, to divide property

4. priority of the family – have the parties given priority to family, proceeded on an assumption of a shared future, made financial sacrifices for welfare of the family, forgone career advancement or left the workforce to raise children?

Additional Factors for Joint Family Ventures

The court considers these other factors:

•    pooling of effort  

•    decisions to have and raise children together

•    length of the relationship

•    a partnership with important mutual goals

•    use of funds entirely for family purposes

•    one spouse takes on all or a greater portion of domestic labor

•    one spouse is freed from responsibilities for economic goals

•    giving priority to family in their decision-making

•    detrimental reliance by one or both parties for the family’s sake.

How the partners lived their lives together is important. This can show they were independent financially or in a joint family venture.

Important for Common Law Spouses

The court will not assume a joint family venture. A cohabitation agreement between partners can confirm that a joint family venture does not exist.

What does all this mean for Diane? Diane had to bring witnesses and evidence of her relationship with Fred for the past 14 years.

“Who would’ve thought I’d have to keep records like that?” Diane asked.

“Well,” I replied, “the onus is on you to prove a joint family venture exists in court.”

Is There a Better Way?

I have read a number of cases that follow the Kerr template. Judicial discretion and the decisions vary greatly. It is impossible to tell clients, like Diane, what will happen if she goes to court.

A statutory frame work may be the best answer. It could keep many cases out of the courtrooms.

Diane reached a settlement with Norma at mediation. She was happy with the results. She paid less tax than Fred ever thought was possible.

Diane was glad she did not have to go to court to prove she was in a joint family venture. A cohabitation agreement could have helped her suffer less. But these new rights did not exist when she bought the house with Fred.

Domestic Partners in Other Provinces

Note: not all provinces treat common law spouses the same way. Donalee Moulton, in her Canadian Lawyer Magazine article, explains common law spouses’ rights in other provinces.