# Home Buyers Plan & separation



## tundrabird (Nov 16, 2009)

Hi,

I am recently separated (permanently) from my common law husband and am about to buy my first house. While we were married, my husband was the sole owner of our principal residence. I was not involved in the purchase or payments, which happened before we began living together.

I would like to make a withdrawal from my RRSP under the Home Buyers Plan (HBP):
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/frst-eng.html

On that page, the CRA says that "You are not considered a first-time home buyer if you or your spouse or common-law partner owned a home that you occupied as your principal place of residence during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal."

However, the CRA does not give an example of my situation (I am now separated from the common law partner who owned the home, so I believe I should be eligible for the HBP).

Does anyone have experience with this, or could you help me interpret the CRA's rules?

Thanks.


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## Cal (Jun 17, 2009)

I am sure that an accountant would be able to tell you the answer for this in a second. They know all of these rules.

In theory, even though he bought and paid for the home prior to the marriage, legally you are entitled to half of its value. Assuming you got that in the separation, then you would have definitely owned the home also in my opinion.

Is my opinion right legally. No idea.

Now, say there was a pre nup, and you legally had no entitlement to the home. They maybe you would have an argument to make.


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## MoneyGal (Apr 24, 2009)

Cal said:


> In theory, even though he bought and paid for the home prior to the marriage, legally you are entitled to half of its value. Assuming you got that in the separation, then you would have definitely owned the home also in my opinion.
> 
> Now, say there was a pre nup, and you legally had no entitlement to the home. They maybe you would have an argument to make.


This is incorrect. 

Common law marriages do not give rise to matrimonial homes. There is no matrimonial property to split when a common-law relationship breaks down, because there is no marriage. 

Pre-nups are valid when a marriage is entered into and then it breaks down; there's no pre-nup that becomes valid at the dissolution of a common-law marriage. 

As for the OP's question, phone CRA. When I read this example on the CRA website, it sounds to me as though you would qualify; however, CRA should be able to answer your question directly.


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## Sherlock (Apr 18, 2010)

MoneyGal said:


> This is incorrect.
> 
> Common law marriages do not give rise to matrimonial homes. There is no matrimonial property to split when a common-law relationship breaks down, because there is no marriage.


I believe you're wrong. If two people live as a couple for 3 years (married or not), they are both entitled to half of each other's assets regardless of who owned what before they moved in together or who paid for what.


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## MoneyGal (Apr 24, 2009)

Nope. A relationship of 3 years may give rise to spousal support obligations, but there is no division of property and no automatic claim to or sharing of assets. One CL spouse can sue the other for what is known as "unjust enrichment," but this is by no means a sure thing and requires a court case (as opposed to at the end of a marriage, where the right to the equal division of property is automatic). 

I am speaking generally about Ontario, but all common law provinces are the same and Quebec is not substantially different. 

Reference 1. 

Reference 2. 

Reference 3.

Reference 4. 

I have no idea why the myth that common-law relationships give rise to a right to the equal division of property is so persistent; it is completely untrue.


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## Square Root (Jan 30, 2010)

MoneyGal said:


> Nope. A relationship of 3 years may give rise to spousal support obligations, but there is no division of property and no automatic claim to or sharing of assets. One CL spouse can sue the other for what is known as "unjust enrichment," but this is by no means a sure thing and requires a court case (as opposed to at the end of a marriage, where the right to the equal division of property is automatic).
> 
> I am speaking generally about Ontario, but all common law provinces are the same and Quebec is not substantially different.
> 
> ...


Thanks. I didn't know this either. Also if husband brought the home into the marriage wouldn't this be excluded from any asset split?


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## MoneyGal (Apr 24, 2009)

To re-iterate: assets are only split in the event of the breakdown of a marriage, not a common-law marriage. 

Marriage (NOT CL marriage) creates a unique form of property called the "matrimonial home" - usually the dwelling ordinarily occupied by the couple during their marriage. 

The value of the matrimonial home (typically including a negative value) must be divided equally by the spouses upon dissolution of the marriage, no matter whose house it was prior to the marriage (if one of the spouses owned the home prior to marriage), and no matter who contributed to it financially or otherwise during the marriage. 

(You can go to court and argue for an unequal split in the value of the matrimonial home. It would be very unusual to have this overturned.) A pre-nup agreement can specify a different split. 

Generally speaking, all other property acquired or held during marriage is split according to the gain in value of the asset during the marriage. This includes pension assets and CPP. A pre-nup can specify a different split. 

I am speaking in generalities but this is the general picture for all of Canada. The ways around matrimonial property laws include valid pre-nups and there are also special circumstances which apply in unusual cases. 

Common law marriage relates to taxation, spousal support and child support. It does not provide for any automatic property rights in any form.


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## GeniusBoy27 (Jun 11, 2010)

I think the rules are clear. If you've not owned a home in the past five, and are not in marriage or common-law partnership then you can use your HBP for up to $25000. The attribution of property is not to you.


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## tundrabird (Nov 16, 2009)

*Thanks*

Hi everyone, and thank you for your replies. The consensus seems to be that I am eligible for the HPB. If I get more formal advice one way or the other, I'll post the results. Thanks again!


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## cardhu (May 26, 2009)

Tundrabird … I don’t think its quite clear, although I do agree with the consensus ... the passage that you quoted seems sloppily worded, and there could be [at least] two plausible interpretations ... one is ... 

that if, during the period specified, you occupied, as a principal residence, a home that was owned by your common-law partner,... (which you did) 

that if, you currently have a commonlaw partner and that commonlaw partner has owned a home that you occupied as principal residence within the specified time period, ... (which you do not) 

I think its more likely the latter, but I would not be shocked to hear it’s the former. 

Definitely worth a call to CRA, although the CRA drones who answer the phones are not always the most knowledgeable . 

…………

Sherlock … others have clarified that there are no “matrimonial home” rights when a commonlaw relationship ends ... but even people who ARE legally married do not have the rights that you claim … with the exception of a matrimonial home, assets that are brought into a marriage (are already owned before the marriage) are off limits in any division of property when the marriage ends (Ontario). 

Sqrt … you have it backward … in a marriage, a home that one spouse brings into the marriage, if used as the matrimonial home, would be excluded from the exclusion from any asset split ... in other words, its the only “owned-before-marriage” item NOT excluded from assets split when the marriage ends.

Moneygal … myths seem more numerous than facts, a lot of the time, as so many threads in forums such as these* so often demonstrate … there are persistent myths circulating on a variety of topics, why should this topic be any different? 

*the views expressed in this post are not directed specifically toward CanadianMoneyForum, its owners, or its members ... past performance is no guarantee of future results ... contest void where prohibited by law.


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## GeniusBoy27 (Jun 11, 2010)

My way of checking was I went through the checklist for the HBP qualification in Quick Tax 2009.


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## MoneyGal (Apr 24, 2009)

cardhu said:


> there are persistent myths circulating on a variety of topics, why should this topic be any different?


Concur. But I can live with persistent myths about whether interest is deductible in a certain circumstance, or whether the Smith Manoeuvre describes leveraged investing generally - how many people do those circumstances really apply to? 

But myths about the division of property upon the breakdown of a common-law marriage are a bigger problem to me (and hence I get hotter under the collar) because they potentially affect so many more people.


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## bean438 (Jul 18, 2009)

That was all news to me. I am surprised no one has launched a charter challenge on this, especially gay people who separate.


Good argument not to get married again


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## Four Pillars (Apr 5, 2009)

bean438 said:


> That was all news to me. I am surprised no one has launched a charter challenge on this, especially gay people who separate.
> 
> 
> Good argument not to get married again


Gay people can get married.


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## tundrabird (Nov 16, 2009)

*Eligible for HBP!*

I found out from the CRA that I am eligible for the HBP! As many suspected here, if you don't CURRENTLY have a common law spouse and have never owned a home yourself, you are eligible, regardless of whether or not you had a CL spouse who owned a home in the past. The CRA website is confusing, but the CRA brochure on the HBP is very specific and clear on the matter. So, that is good news!!!!!!!!! Hope this helps someone else in my situation!


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## cardhu (May 26, 2009)

MoneyGal said:


> Concur. But I can live with persistent myths about whether interest is deductible in a certain circumstance, or whether the Smith Manoeuvre describes leveraged investing generally - how many people do those circumstances really apply to?
> 
> But myths about the division of property upon the breakdown of a common-law marriage are a bigger problem to me (and hence I get hotter under the collar) because they potentially affect so many more people.


That’s true ... though I wasn’t so much thinking about leverage ... I was thinking more of other topics ... topics related to retirement income funding, in which persistent myths have the potential to affect even more people than marriage breakup. Rarely a week goes by, without someone offering highly questionable, shoot from the hip advice, based largely on myth and misunderstanding. 

We all seem to agree on this forum that greater financial literacy is warranted in the population at large; surely an effort to eradicate some of the more persistent myths through identification and correction of flawed reasoning is a concrete example of how to increase financial literacy!


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## bean438 (Jul 18, 2009)

Four Pillars said:


> Gay people can get married.


True, but a possible charter challenge. Arent we supposed to be free from discrimination in terms of marital status?


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## MoneyGal (Apr 24, 2009)

Bean, what are you talking about? Same-sex and opposite-sex couples have EXACTLY the same rights whether they are common-law or legally married. What's the Charter challenge?!


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## OhGreatGuru (May 24, 2009)

bean438 said:


> True, but a possible charter challenge. Arent we supposed to be free from discrimination in terms of marital status?


Where's the discrimination? Two consenting adults consciously make a decision not to get married - why then should they complain of not being treated as married? (The family law rules on common law started out mainly to protect any children of such relationships, which is why there is an entitlement to child support.) But the law has gradually transmogrified to extend a variety of tax benefits and social benefits on an equal basis. We are are getting to the point now where the state is telling a couple they are married, even though they had no intention to be.


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## MoneyGal (Apr 24, 2009)

OGG: I agree with you, for the most part. However, the Canadian government is entitled (in my view) to treat a couple with children as married when they are calculating the entitlement of that household to taxpayer-paid social benefits, such as the Canada Child Tax Benefit. 

In my view this is not "telling a couple they are married, when they had no intention to be" - it is telling a couple that they are an economic unit (consistent with Canadian family law) and they will be treated as such for tax purposes. 

If you look at tax consequences associated with marriage (both "legal" and common-law) over the taxpayer's lifetime, the benefits (i.e., capacity to roll assets over tax-free at death) far outweigh the "costs" (lowered CCTB, GST benefit). This is part of the reason that same-sex couples wanted to have the capacity to form marriages recognized in Canadian law, including tax law.


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## solrpr (Mar 23, 2011)

*home buyers plan and CL separation*

QUOTE=tundrabird;27986]I found out from the CRA that I am eligible for the HBP! As many suspected here, if you don't CURRENTLY have a common law spouse and have never owned a home yourself, you are eligible, regardless of whether or not you had a CL spouse who owned a home in the past. The CRA website is confusing, but the CRA brochure on the HBP is very specific and clear on the matter. So, that is good news!!!!!!!!! Hope this helps someone else in my situation![/QUOTE]

*Hello...new to this forum, so hoping i do this right.* 
i am in the same situation today, separated from my CL partner 2 months ago. the house is in his name, i did not contribute in any way. lived there for less than a year, but we have a child together who is now 6 months old.
anyways, i called the CRA to see if i qualify as a *first time home buyer *and they said , no..even though i dont have a cl now and have never owned a property anywhere in the world!

advice please! would he helpful and much appreciated.
Thanks ALL


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