Are you and your partner debating between tying the knot or just living together as common-law partners? While there are many factors to consider when making this decision, one of the most significant is the financial benefits that come with being married versus common-law. In this article, we'll explore the financial advantages of both options for couples in Canada who make more than $100,000.
Contents
- Financial Benefits of Getting Legally Married in Canada
- Financial Benefits of Getting Legally Married in Canada
- Financial Benefits of Staying Common-Law in Canada
- Financial Benefits of Staying Common-Law in Canada
- Factors to Consider When Deciding Between Marriage and Common-Law
- Factors to Consider for High-Earning Couples in Canada
- Conclusion
Financial Benefits of Getting Legally Married in Canada
“Love may be priceless, but the tax benefits of marriage are not.”
One of the primary financial benefits of getting legally married in Canada is the tax advantages. Joint filing can reduce your overall tax burden, especially if you and your partner make significantly different incomes. Additionally, couples living in certain provinces, such as Alberta and Quebec, can take advantage of income splitting benefits to lower their tax bill.
But the financial benefits of marriage don't stop there. Legally married couples are also eligible for survivor benefits in the event of one partner's death. This includes pension benefits and social security benefits, which can provide much-needed financial support during a difficult time.
And let's not forget about estate planning. Legally married couples have greater flexibility in terms of inheritance and property division. This can be especially important if you have children from a previous relationship or if you own significant assets.
Financial Benefits of Getting Legally Married in Canada
When it comes to financial benefits, getting legally married in Canada offers several advantages for high-earning couples. Here are some of them:
Lower Taxes
- Married couples in Canada can benefit from several tax advantages, including income splitting and potential eligibility for the spousal amount tax credit.
- Income splitting allows couples to shift income from the higher earner to the lower earner, potentially resulting in a lower overall tax bill.
Estate Planning
- Married couples can take advantage of several estate planning strategies, such as spousal rollovers and spousal trusts.
- These strategies can help minimize taxes and ensure a smooth transfer of assets in the event of one partner's death.
Legal Protections
- When you get legally married in Canada, you and your partner are entitled to several legal protections, including spousal support, division of assets in the event of a divorce, and more.
- This can provide peace of mind and security for high-earning couples who want to protect their assets and financial well-being.
While getting legally married in Canada may not be the best option for every couple, it can offer significant financial benefits for high-earning partners looking to save money on taxes, protect their assets, and plan for their financial future.
Financial Benefits of Staying Common-Law in Canada
“Don't tie the knot, tie your shoes and run.”
While getting legally married may offer some financial benefits, there are also advantages to staying common-law. For example, common-law partners can avoid the legal fees associated with getting married. Plus, there's no need for a formal divorce if the relationship ends – you can simply separate and go your separate ways.
Common-law partners can also protect their individual assets in the event of a separation. Unlike legally married couples, common-law partners do not have to divide their assets equally. This can be especially important if you have significant assets or if one partner has more debt than the other.
And let's not forget about the tax benefits. Common-law partners may be able to take advantage of spousal RRSP contributions and TFSA contributions, as well as potential income splitting benefits in certain provinces.
Financial Benefits of Staying Common-Law in Canada
When it comes to financial benefits, staying common-law also has its advantages for high-earning couples in Canada. Here are some of them:
Avoiding Legal Fees
- Unlike getting legally married, there are no legal fees associated with staying common-law.
- This can be especially beneficial if you and your partner are trying to save money or have other financial goals.
Flexibility in Asset Division
- If you and your partner decide to separate, common-law partners do not have to divide their assets equally.
- This can be particularly helpful if one partner has significantly more assets or debts than the other.
Tax Benefits
- Common-law partners may be able to take advantage of spousal RRSP contributions and TFSA contributions.
- They may also be able to benefit from potential income splitting benefits in certain provinces.
While staying common-law may not offer the same legal protections and benefits as getting legally married, it can still be a viable option for high-earning couples in Canada who prioritize financial flexibility and independence.
Factors to Consider When Deciding Between Marriage and Common-Law
“Marriage is a wonderful institution, but who wants to be institutionalized?”
When it comes to deciding between marriage and common-law, there are many factors to consider beyond just the financial benefits. Family planning, legal protections, and personal values all play a role in making this decision.
For example, if you're planning on starting a family, getting legally married may provide greater legal protections and benefits for your children. On the other hand, if you value independence and flexibility, staying common-law may be the better option for you.
It's important to take the time to discuss your options with your partner and consider all of the personal and legal implications of each choice.
Factors to Consider for High-Earning Couples in Canada
When deciding whether to get legally married or stay common-law, there are several factors high-earning couples in Canada should consider. Here are some of them:
Tax Implications
- While getting legally married can offer tax benefits, it's important to weigh these benefits against the potential costs associated with getting married, such as legal fees and the impact on government benefits.
- Couples should also consider the potential impact on their taxes if one partner earns significantly more than the other.
Legal Protections
- While staying common-law can offer more financial independence and flexibility, it may not provide the same legal protections as getting legally married.
- Couples should consider their financial situation and priorities when deciding which option is best for them.
Relationship Goals
- Ultimately, the decision to get legally married or stay common-law should be based on the couple's relationship goals and values.
- Couples should have an open and honest conversation about their financial situation, goals, and priorities before making a decision.
By taking these factors into consideration, high-earning couples in Canada can make an informed decision about whether to get legally married or stay common-law, based on their unique financial situation and relationship goals.
Conclusion
“Whether you choose to say ‘I do' or just ‘I don't know', make sure it's the right choice for you and your partner.”
In the end, the decision between getting legally married or staying common-law is a personal one that should be based on your unique financial and personal circumstances. While there are certainly financial benefits to getting legally married in Canada, there are also advantages to staying common-law.
By understanding the financial benefits of each option and considering the other factors at play, you and your partner can make an informed decision that works best for your relationship.
