Gone are the days of “single” or “married”. You only have to look at Facebook’s relationship declaration options to know that today’s partnerships come in all shapes and sizes. But what are the financial risks of being involved in a long-term relationship that is not formally recognized as a marriage?
Patterns of marriage, divorce and cohabiting without marriage had been changing for years. The incidences of domestic partnerships are growing throughout the world, according to the 1996 census, 1.3million people described themselves as living with a partner. When the 2001 census came around, this figure had almost doubled to nearly 2.4million. Many people believe that, if they live together for some time, the relationship will be recognized by the state, and there will be legal rights, duties and protection. But there was no such thing as common-law marriage – because the concept has been abolished worldwide. The time a couple spend living together does not translate into a default marriage. The consequence is that, at the dissolution of the relationship, the assets or any obligations are determined or distributed on a basis of the arrangement that parties used during their relationship.
Domestic partnerships were never prohibited in South African law – but neither did they enjoy any noteworthy recognition or protection. In SA, marriage laws traditionally provided parties with a variety of legal protections. These laws governed what happened to the property of the parties during the marriage and on dissolution, either by divorce or death, and also meant that certain benefits were automatically acquired, such as membership of medical aid funds, pension funds, etc. Married spouses also had a reciprocal duty of support under the common law. South African courts had occasionally helped couples by deciding that an express or implied universal partnership existed, but this was usually difficult to prove. The only way to be protected in our law is to enter into a cohabitation agreement. Such an agreement clarifies the expectations of the partners and also serves as an early warning of future problems.
A cohabitation agreement will determine what would happen to the property and assets of the couple if they should decide to separate. The agreement is, however, not enforceable in so far as third parties are concerned.
However, in terms of the 2005 Children’s Act, the parents of children born out of wedlock had a duty to maintain their offspring, irrespective of the living arrangements. Basically a cohabitation agreement regulates rights and duties between the partners. It could almost be compared to an antenuptial contract entered into prior to the conclusion of a civil marriage. The agreement can provide for the division and distribution of assets upon dissolution: for instance, the formal agreement may set out the rights and obligations towards each other; the respective financial contributions to the joint home; clarify arrangements regarding ownership of property that they may purchase jointly and the division of their jointly owned assets should they separate.
An agreement such as this will be legally binding as long as it contains no provisions that are immoral or illegal. If there is no agreement on the dissolution of a domestic partnership agreement, a party would only be entitled to retain those assets which he or she has purchased and owns and further would be entitled to share in the assets proportionately in terms of the contribution which they have made to the partnership. However, problems arose if a partner tried to enforce a domestic partnership agreement if the partner being sued was married to someone else. It has been argued that in such cases domestic partnership agreements violate public policy to the extent that they impair the community of property rights (where applicable) of the lawful married spouse.
The Domestic Partnerships Bill was still being formulated, and it wasn’t clear how it would be implemented. In the current constitutional dispensation it is unlikely that a partner will be left in despair, taking into account the Domestic Partnerships Bill. My advice would be for cohabiting couples to enter into a contract – a written partnership agreement that states exactly what will happen in the event of death or a split, protecting their rights and outlining their obligations. For example, when it comes to the ownership of property, the contract should state what happens to ownership of the property (such as one spouse buying out the other) or payments in the event of death or a split. Putting any relationship into writing is always helpful, even if it’s just adding someone on your medical aid as a dependant. “Having said that, in the event of death, having a will is always the best idea. Out of the bounds of a legally recognised marriage there is no intestate succession – meaning there is no automatic participation in the estate to make sure the other partner is looked after. Joint accounts never a good idea Money is one of the most important matters a couple needs to resolve when contemplating living together or marriage. One issue that often comes up in these kinds of discussions is whether to have a joint bank account. In many ways, this can seem like an appealing option. However, most financial experts don’t recommend having a joint account at all.
One never encourage a joint account because whether you are married or living together, you both need to grow your assets and get a good credit rating. Having a joint account invariably makes it difficult for one of the partners to do so. Besides, a joint bank account puts one partner at great risk in the event of a break-up, death or financial difficulties. There is no joint bank account with two equal account holders. A ‘joint’ account is actually an account in one person’s name, to which the other person is a signatory. This causes a number of complications for that signatory. The most important of these is that without a bank account in your name, you will have no credit record at the bank – which makes it difficult to get credit at shops, open a cellphone account or apply for a loan. In the event of a break-up, the joint account could be emptied by one partner or the person in whose name the bank account is held could remove the second signatory. If one partner dies, banks tend to freeze the account until the estate is resolved – leaving the signatory partner with no access to the funds for an extended time. One should advise couples to split responsibility for monthly expenses, or open an account for the household into which both pay a portion of their salaries for general expenses.
Who gets your pension? There are typically two types of benefits payable to “spouses”. Firstly pensions, which are payable to those who qualify as spouses – and that would depend on how each fund defines an ‘eligible spouse’: people must check the fund rules to see if their partner/spouse would qualify. Fund rules may stipulate that you must be married to the same person at date of retirement and date of death for them to qualify for a spouse’s pension. This prevents so-called ‘death-bed marriages’ where a pensioner marries someone much younger than them after they have already retired – and on their death the fund realises that there is a much younger spouse to whom they have a liability to pay a pension for many years.
The second benefit type is the typical fund benefit (fund credit or share of fund) plus an insured multiple of a salary (three times annual salary, for example). This is allocated by the trustees, to your dependants and nominees. A dependant includes a spouse; the Pension Funds Act defines a spouse as a person who is the permanent life partner or spouse or civil union partner of a member in accordance with the Marriage Act, Recognition of Customary Marriages Act, Civil Union Act or the tenets of a religion. A very wide definition. To ensure that no partner is overlooked, the pension fund member should always nominate a beneficiary in the relevant form to help the trustees – although trustees are not absolutely bound to follow that nomination. Unfortunately, when it comes to death and money such decisions by fund trustees are often contested.
Here is a very basic Cohabitation Agreement:
The following form is intended for illustrative purposes only. You and your attorney can use this sample as a guide in drafting a cohabitation agreement that best protects your interests and complies with the laws in effect where you live.
Why do I need a Cohabitation Agreement?
A Cohabitation Agreement sets out the financial terms of a couple’s relationship, and provides protection for the parties upon death, or should the relationship fail.
Who should use a Cohabitation Agreement?
Any unmarried couple in a relationship and living with each other could find this agreement useful.
Also known as:
- Conditions of Cohabitation
- Cohabitation Contract
It is advisable that you contact an attorney in regard to drafting such an agreement.
(The 1st Party)
(The 2nd Party)
1. The parties are currently living together in a domestic partnership and intend to continue living together in this arrangement;
2. The parties wish to define their respective proprietary rights and liabilities arising from their domestic partnership arrangement;
3. The parties each acknowledge that they enter into this agreement voluntarily, without any duress or undue influence, and that each has had the opportunity to consult with an attorney of his/her choice;
THE PARTIES AGREE:
1. Marital Status
The joint residency of the parties shall in no way render the parties married in any way, whether by operation of common law or any other law.
2. The Agreement
2.1 This Agreement consists solely of the mutual promises contained herein and the mutual promises of each party to act as the living companion and partner to the other.
2.2 This Agreement fully contemplates and compensates any and all services provided by either party for the benefit of the other during the course of their joint residency. The furnishing of sexual services shall in no way be construed as consideration for this Agreement.
3. Disclosure of Current Financial Status
Each party has fully and completely, to the best of his/her knowledge, disclosed to the other party his/her current financial condition including all assets and liabilities. Each party has attached a balance sheet to this agreement indicating his/her current assets and liabilities with the understanding that this balance sheet reflects his/her current financial status to the best of his/her ability.
4. Division of Living Expenses
Necessary and jointly approved living expenses shall be divided between the parties as below:
4.1 The 1st Party shall contribute _____________ percent ( ____%) per month;
4.2 The 2nd Party shall contribute _____________ percent ( ____%) per month.
The parties shall contribute their monthly pro rata contributions into the joint savings/current account of the parties. Any property purchased using funds in this account shall be considered to be the joint property of the parties and owned according to the respective party’s percentage of contribution as stated above. Either party may draw upon this checking account.
5. Separate Property
The following properties shall be kept by the parties as the separate property of the recipient and the said properties shall not be subject to division at the termination of this Agreement:
5.1 All and any property, real or personal, owned by a specific party at the date of execution of this Agreement;
5.2 Individual gifts, bequests or inheritances acquired before or after the execution of this Agreement;
5.3 Individual earnings, salary or wages acquired before or after the execution of this Agreement;
5.4 All income or proceeds derived from the aforementioned properties.
6. Commingling of Property
All commingled property shall be presumed to be joint property of the parties unless otherwise agreed.
7. Joint Property
All property acquired by the parties after the date of execution of this Agreement and before the termination of this Agreement and procured jointly with joint resources and funds shall be considered joint property of the parties with each party possessing his/her aforementioned percentage of ownership.
8. Division of Property upon Termination
Upon termination of this Agreement or termination of the joint residency, all jointly owned property shall be divided among the parties according to their pro rata share listed above. If the parties are unable to agree on the appropriate division of joint property, they may appoint an independent and mutually agreed upon Third-party to act as Appraiser. The Appraiser shall divide the property among the parties according to his/her pro rata share.
9. Duty of Good Faith and Confidentiality
9.1 This Agreement creates a fiduciary relationship between the parties in which each party agrees to act with the utmost of good faith and fair dealing toward the other in the management of their joint property and in all other aspects of this Agreement.
9.2 Without obtaining a parties’ written consent in advance, a party shall not directly or indirectly publish, or cause to be published, any diary, memoir, letter, story, photograph, interview, article, essay, account, or description or depiction of any kind whatsoever, whether fictionalised or not, concerning the relationship or any other aspect of a parties’ personal, business or financial affairs, or assist or provide information to others in connection with the publication or dissemination of any such material or excerpts thereof.
10. Legal Names of Parties
Each party shall retain his/her legal name, including surname, as printed and signed in this Agreement.
11. Duration of Agreement
This Agreement shall become effective at the date of execution and shall remain in effect until termination. Termination shall be effected by written notice by either party, cessation of the joint residency by either party or death of either party. Either party may terminate this Agreement unilaterally at any time.
12. Death of Party
Upon the death of either party, the surviving party waives all rights to support by the deceased party.
13. Complete Agreement
It is the intent of the parties that this Agreement be the full and complete agreement between the parties regarding their joint residency. No variation of this agreement shall be of force or effect unless reduced to writing and signed by both parties.
14. Severability of Provisions
Should any paragraph or provision of this Agreement be held invalid, void, or otherwise unenforceable, it is the intent of the parties that the remaining portions shall nevertheless continue in full force and effect without impairment.
15. Governing Law
This Agreement shall be governed by, interpreted and construed in accordance with the laws of the Republic of South Africa.
DATED at this day of 201_
DATED at this day of 201_
About the author:
Bertus Preller is a Divorce and Family Law Attorney in Cape Town and has more than 20 years experience in most sectors of the law and 13 years as a practicing attorney. He specializes in Family law and Divorce Law at Abrahams and Gross Attorneys Inc. in Cape Town. Bertus is also the Family Law expert on Health24.com and on the expert panel of Law24.com and is frequently quoted on Family Law issues in newspapers such as the Sunday Times and Business Times. His areas of expertise are Divorce Law, Family Law, Divorce Mediation, Parenting Plans, Parental Responsibilities and Rights, Custody (care and contact) of children, same sex marriages, unmarried fathers rights, domestic violence matters, international divorce law, digital rights, media law and criminal law.