“The course of true love never did run smooth.” (William Shakespeare)
The times they are a-changin’
Living together and having children without getting married is becoming increasingly accepted worldwide. When Boris Johnson and his partner lived together as the first unmarried couple in No 10 Downing Street, there was no peep from the harsh British media. (The tabloids had their say on plenty of his other choices!) And in South Africa, cohabitation increases by almost 100% each year.
When couples decide to tie the knot, they often prepare an antenuptial contract. This can be uncomfortable as it makes them feel like they’re planning for divorce. This discomfort also applies to couples who decide to live together and are encouraged by their financial planner to prepare a cohabitation agreement. But despite the discomfort, it’s well worth it. Here’s why…
Cohabitation agreements 101
A cohabitation agreement defines shared money values. Signing a cohabitation agreement doesn’t mean you’re married in any way. The agreement includes mutual promises and is designed to provide peace of mind and a sense of security in the relationship.
The agreement usually includes disclosing each partner’s financial status (including debt) and the division of living expenses. It can go as far as defining domestic and financial duties expected by each partner.
The bottom line: Couples with the same beliefs and value systems, who plan together financially, stay together.
What about property?
A cohabitation agreement also considers the ownership of property, including:
- The home in which the couple lives (One option is for one partner to purchase the property while the other maintains it, but there are loads of other ways of doing it. The key is to talk about it!)
- Property purchased during the relationship.
- Property owned before the relationship.
The agreement also considers the ownership of other assets, including:
- InheritancesIndividual earnings
- Earnings from properties
It’s also advisable to consider the cost of maintaining a life partner should the relationship not work out and to include your decision in the agreement. If this decision isn’t included, cohabitants are not obligated to maintain each other and have no enforceable right to claim maintenance.
Antenuptial contracts (prepared before marriage) can be in or out of community of property, the latter with or without accrual. These days, most couples opt to get married out of community of property with accrual. Still, the other systems have their place, especially when there’s a large differential in family wealth.
Similarly, a fair cohabitation contract depends on many variables. If it’s based on fairness, respect, and love, it will help the relationship last.
Interestingly, if persons decide to marry and don’t prepare an antenuptial contract, in community of property is the default position. This concept doesn’t apply to couples living together without formally marrying, reiterating the need for a co-habituation agreement.
Love and the law
Unfortunately, cohabitation agreements are not yet legally binding in South Africa. Nevertheless, they can assist the court with decisions regarding the division of assets and maintenance costs should the relationship end.
The good news is that the law is on the cohabitants’ side regarding:
- Domestic violence.
- Medical schemes (a life partner may be a dependant.)
- Tax and estate duty (cohabitants are treated as spouses.)
- Life insurance (a life partner may be a beneficiary, but the nomination must be precise because a clause in an insurance policy that confers benefits on members of the insured’s “family” may cause problems.)
- Maintenance of children (both parents have rights and responsibilities, regardless of living arrangements.)
Unfortunately, the law doesn’t allow you to transfer your pension assets to your life partner. Also, cohabitants cannot reclaim monies spent on maintaining their partner during the relationship – unless they can make out a case for unjust enrichment. Similarly, donations made between partners in a cohabitation relationship cannot be claimed back by the donor.
Till death us do part
Following a recent Constitutional Court ruling, partners in long-term relationships can inherit intestate (without a Will). The change means that a life partner is also entitled to a maintenance claim against the deceased’s estate.
South African law is (gladly) becoming less discriminatory. But a valid Will is still the safest way to ensure that your last wishes are implemented and that your life partner will inherit as you wish. (This goes for married couples, too.) Your cohabitation agreement and Will should be reviewed annually as circumstances always change.
Please get in touch with us if you’d like help preparing a cohabitation agreement. Your continued happiness and prosperity is our number one priority.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.