Common-law couples in Canada are on the rise. In fact, according to Statistics Canada, among G7 countries, Canada boasts the highest share of couples living common-law, accounting for 23% of all couples in the country. The province of Quebec leads the way, with more than two-fifths (43%) of Canada's common-law couples residing there. Excluding Quebec, the national prevalence of common-law couples would have been 17% in 2021, according to Statistics Canada. (source)

Common-law relationships are partnerships in which couples live together in a conjugal relationship without the legal ties of marriage. These couples share responsibilities and resources much like married couples, although without the formal legal recognition of marriage. In Canada, common-law relationships come with rights and responsibilities similar to those of married couples, though they can vary depending on the province or territory.

Our FAST team (Financial Advisory Support Team), consisting of experienced professionals including lawyers and accountants, is dedicated to helping clients navigate the complexities of financial planning, taxation, and estates. Given the frequent changes in regulations related to laws and taxes, we turn to our FAST team for clarity and guidance. Recently, a client asked a crucial question about designating the beneficiary of his RSP account. He inquired, "If I designate my common-law partner as the beneficiary of my RSP account, would she qualify for a tax-free rollover upon my passing? Am I obligated to report our common-law relationship to the government?"

According to the Canada Revenue Agency (CRA), individuals in conjugal common-law relationships should report their status when filing their personal tax returns. The CRA provides guidance on how individuals should report their marital status and relationships, making it vital to stay informed about these requirements. You can find more information on this topic on the CRA website: CRA Marital Status Information. (source)

Furthermore, the definition of a conjugal relationship is broader than commonly perceived. As outlined on the Government of Canada's website, "A conjugal relationship is one of some permanence, where individuals are financially, socially, emotionally, and physically interdependent, where they share household and related responsibilities, and where they have made a serious commitment to one another.(source)

Hence, at the time of one’s death, a transfer of RRSP or RRIF on a tax-deferred basis to a common-law partner is possible. However, it is crucial to have the common-law relationship officially recognized by the CRA. Failing to do so may lead to complications when attempting to prove the relationship's legitimacy to the CRA upon one’s passing. Given the complexities of tax consequences and legal implications, clients are strongly advised to seek guidance from qualified lawyers and accountants. This ensures both compliance with tax regulations and a thorough understanding of the financial ramifications of such decisions.