Money tips for ‘Cohabs’

Intro comment by APD

IT ALL IS so easy at the start and as I often say, “things are fine so long as they are fine”, it is when a problem occurrs, such as separation of estates on death or the end of a relationship that the reality sets in. Of course, at the start it is human not to face the unpleasent thought of a problem later on. There is nothing special about cohabiting when it comes to estate planning, it is just that when getting married there are legalities and formalities that often force us into proper and correct documentation of our lives. Prevention and protection is desirable from the beginning.

There is much wisdom in the article here and it is really so easy.

First published in Fin24

Dec 19 2010 12:46

Letitia Watson

THE law is very clear about the rights of married couples, but there are many uncertainties about those who live together without having tied the knot. While legislation about live-in couples is currently being reviewed, it has not been finalised and there is at present no protection if one of the partners is in a vulnerable financial position.

When a live-in relationship ends, each person basically has the right to keep his or her own assets and debts.

“There is a misconception that the longer you have lived with another person, the more rights you will have,” says Bert van Blerk, consultant with Sanlam Trust, “This is certainly not the case”

Wills

“If your partner of the opposite sex dies without a will, you won’t inherit anything. You also can’t put in a claim against the estate. You need to stipulate exactly what your partner will inherit in your will to ensure that he or she receives anything,” he says.

The partner must be easily identifiable, so an ID number and full names are advisable in the will. Remember, however, that it’s not difficult to change a will and just because you were mentioned once, doesn’t mean you won’t be excluded later. If you do leave something to your partner in your will and you can prove that you lived together permanently, it may have some beneficial estate tax implications.

Pension

You may be able to receive your partner’s pension if you qualify as a dependent according to the Pension Fund Act, and if you received maintenance from your partner. The trustees of the pension fund will decide the definition of dependent, and how the available money will be allocated.

Property

There are both drawbacks and benefits if you and your partner buy property together and register it in both your names.

“The advantage is that you will have a stake in fixed property, it will offer you security and you will share in the growth of the asset. The drawback is what happens to the property if the relationship ends or if one of the parties dies,” says Van Blerk.

He recommends that live-in partners agree to sell the property and share in the return should they go their separate ways. You can also agree to leave your stakes in the property to each other in you wills. But there is no guarantee that your partner won’t change his or her mind. You can also take out life insurance on the other partner and enter into a contract, which stipulates that the surviving partner can buy out the other person’s stake. The proceeds of the life insurance can be used.

Bank accounts

“There are currently no bank accounts that allow for equal account holders,” says Sugendhree Reddy, Standard Bank’s director for banking products. “A bank account is always in one person’s name, while the other person has signing rights.”

The problem is that the person with signing rights won’t be able to build up a good credit record, since they don’t have a bank account in their name. This makes it very difficult to get credit. And if you should split up, the primary account holder can withdraw everything without alerting the person with signing rights. Also, if for instance the account holder owes tax money, the SA Revenue Service can issue instructions to withdraw the money from the account. The bank will also freeze the account if the account holder dies, leaving the person with signing rights without any access to the money. Reddy’s advice?

“Each partner should have his or her own account, with a joint one for household expenses.”

How do you safeguard yourself?

A lawyer should draw up a contract, much like the one partnerships use, for you. A good contract will ensure that no one sells or rents out joint assets, or uses them as surety, without the written agreement of the other person. Ensure that the contract contains the names and ID numbers of both parties, as well as addresses, the assets with which you enter the partnership, all your contributions and how assets will be divided if your “partnership” should end.

The contract will also make provision for the resolution of possible disputes over assets, for instance an arbitration process with a lawyer or through the courts. If there are children or pets, the contract also needs to stipulate what will happen to them if you decide to go your separate ways.