Act to establish a parental union status in Quebec

On June 4, An Act respecting family law reform and establishing the parental union regime was assented to. This Act amends the Civil Code of Québec and creates a parental union status for common-law spouses with a child born (or adopted) after June 29, 2025 and creates a parental union patrimony composed of the family residences, the movable property with which they are furnished and the motor vehicles used by the family. The value of this patrimony would be equally divided between the former spouses in a parental union should the common-law partnership end during their lifetime or upon death. In addition, the Act provides protection for the family residences and a compensatory allowance.

The Act provides for its partial entry into force on June 30, 2025. From the outset, it should be noted that it will not apply to common-law spouses with children born before June 30, 2025, unless they give birth to (or adopt) a child after June 29, 2025 or voluntarily opt in to the parental union regime. There does not appear to be any retroactivity.

A key feature of the Act is that the status of parental union spouse automatically applies to the concerned persons and no legal action is necessary to be subject to it. Furthermore, parental union spouses may not withdraw from the parental union regime. They are, however, able to withdraw from the application of the parental union patrimony but not from other measures related to the parental union (e.g. protection of the family residence and the compensatory allowance).

As mentioned above, the beginning of the parental union regime establishes a parental union patrimony (unless the spouses choose to withdraw from it). This patrimony does not change the ownership of the property it consists of. As with the family patrimony for married couples, the end of the parental union results in a debt owed to one of the spouses to equalize the value of the parental union patrimony held by each. This debt may be paid in cash or by transferring full or partial ownership of the property. The former spouses may also agree that the debt will be paid via the transfer of another asset, such as an RRSP, a RRIF, a TFSA, a pension plan or even QPP entitlement (although the latter is a little more complicated), among other options.

When a parental union ends with the death of the wealthier spouse, the amount owed to the surviving spouse from the parental union patrimony becomes a debt in the deceased’s estate. This debt is payable before bequests to heirs. When a parental union ends with the death of the less wealthy spouse, the amount owed to the deceased by the surviving spouse from the parental union patrimony becomes an asset in the deceased’s estate and will be passed on to the heirs named in the will after any debts are paid. If the surviving spouse is the heir, they will recover the amount (or the amount owed will be cancelled in whole or in part). If recovered, the amount could potentially be reduced by the sum used to pay the deceased’s debts. If they are not the heir, they will lose this amount to the heir(s). It is important to watch for situations where a will drawn up prior to a child’s birth left all assets (at that time, only a bit of money) to a close relative. In such cases, after the beginning of the parental union, the amount owed from the parental union patrimony would be left to that close relative! It is easy to see that it may be more important than ever to cover household debts with adequate life insurance. It may be just as important to cover the parental union patrimony debt upon death in cases where the surviving spouse may not be an heir and wants to keep the house. In the event of death, a life insurance policy could also be used to guarantee receipt of the parental union patrimony, the payment of which would be spread over a few years by means of a judgment.

It should also be kept in mind that, upon death and regardless of whether they were in a parental union, common-law spouses may generally be entitled to the priority payment of benefits from a pension plan (including LIRAs, LIFs and locked-in RRSPs) or a joint and survivor annuity, depending on how long they had lived together.

In a succession where there is no will, the assets are left to the heirs provided for in the Civil Code by default, including the surviving married or civil union spouse, among others. The Act grants the status of surviving spouse to a parental union spouse who had been living together with the deceased. It is important to note that the bill that preceded the Act provided for the spouse to only acquire this status after having lived together with the deceased for more than one year. This requirement was removed.

The partitionable value of the property forming the parental union patrimony is calculated in a very precise manner. In grossly simple terms, it consists of the value of the property (the family residences, furniture and vehicles) at the beginning of the parental union (not at the beginning of the common-law partnership) minus the related debts and the value this property had at the beginning of the union. The growth in the value of the property over time is also taken into account. Contributions that spouses made during the parental union with amounts from a gift or an inheritance or with amounts accumulated before the union are also deducted from the value of the property. The fruits and revenues derived from these amounts are excluded as well.

It will become important for investment advisors to manage money with two periods in mind—the period before and the period after the beginning of the parental union. In fact, it would be wise not to mix assets from the two periods in case mortgage payments need to be made (or a residence is acquired). Clients will be able to choose whether or not to make these repayments from investments held before the beginning of the parental union (which would be excluded from the partitionable value) or investments from work income earned after the beginning of the parental union (which would increase the partitionable value).

Understandably, for the majority of couples in a parental union, the value of this patrimony is likely to be fairly low in the early stages of the union. That is unless one spouse is the sole owner of the home, earns an excellent income and significantly accelerates the repayment of the mortgage by paying it off with income earned during the parental union. Leased motor vehicles should generally not be included in the parental union patrimony. Similarly, couples who are renting their family home (rental accommodation) would generally not enter any value under “family residences.”

If the bill is eventually adopted in its current form, advisors should keep in mind that their clients will need a lot of financial education on the topic. There will also be opportunities to have general discussions around invested assets and insurance opportunities in relation to the death of a spouse in a parental union.

Advisors will begin to meet with their first clients in a parental union as of June 30, 2025. However, there will be many questions from clients in the meantime. One thing is certain—we will be keeping a close eye on case law developments related to this topic!

It is important to note that this article is for information purposes only and does not constitute legal, tax, investment or financial planning advice. Any client or advisor in such a situation should ensure that they fully understand the concepts applicable to their specific situation. They should also seek professional advice to determine whether or not this content applies to their situation.