When it comes to the law, the biggest difference between being in a marriage and a common-law relationship is the way your property is treated once the relationship ends.

In a marriage, marital property is divided between the spouses – a process known as “equalization.” In a common-law relationship, however, each partner takes back the property they brought into the partnership. This may sound straightforward, but things can quickly become complicated in situations where partners have commingled their property – a situation that often happens in relationships that span several years or those that feature children born of the common-law relationship.

Census data reveals that the number of common-law relationships is on the rise, with the number of common-law couples increasing to 16.7 percent of all families as of 2011.

The Benefits of a Cohabitation Agreement

Property disputes in common-law relationships can be avoided by using a cohabitation agreement. Without one, a former partner may be able to make a valid claim on assets owned by the other partner. By entering into a cohabitation agreement, the parties can decide in advance how they will handle the division of property, investments, and any other assets they choose to list in the agreement. This can be especially critical if one partner owns a significant asset or expects to receive a sizeable inheritance or gift down the road. Additionally, a cohabitation agreement can be beneficial in cases where one or both partners own a business.

Although most people don’t like to contemplate a breakdown of their relationship in the future, entering into a well-structured cohabitation agreement can save both sides a lot of time and money in the event they decide to part ways.