Living together as a couple? Joint financial planning is an imperative

woman handing man keys

While cohabitation is not recognised as a legal relationship in South Africa, it is encouraging to note that our common law has developed – and continues to do so – to accommodate the rights of those who choose to live together outside of the tenets of marriage. Having said that, it is worth noting that there is currently no law that regulates the rights of cohabitants, and it is therefore important for couples who choose to live together to mitigate against the financial risks they may face.

(i) Existing recognition for life partners

In this section, we explore legislation that provides recognition for cohabitants and how this affects couples financially. In the first instance, the Medical Scheme Act makes provision for the ‘spouse or partner’ of the principal member and any minor children to be added as dependants on his/her medical aid. Similarly, for the purposes of tax legislation, cohabitants are recognised as spouses, with the term ‘spouse’ defined to include a permanent, same-sex or heterosexual relationships. In the absence of any proof to the contrary, the definition in these Acts provides that cohabitants are deemed to be in a union without community of property. The financial benefits that flow from this recognition includes that donations tax is not payable on donations between partners, and no transfer duty is payable on the transfer of property between couples on the termination of the relationship. In addition, estate duty is not payable on any asset bequeathed to a partner, and CGT is not payable on the disposal of an asset from one partner to another.

In terms of beneficiary nomination, cohabiting couples are free to nominate each other as beneficiaries on life policies and/or retirement funds, although it is important to ensure that the intended beneficiary is clearly named and identified to avoid confusion. In the case of a life policy, the insurance company must ensure that the proceeds are paid to the nominated partner of the deceased – but keep in mind that the procedure is somewhat different in the case of retirement funds where the distribution of the deceased partner’s death benefits is governed by Section 37C of the Pension Funds Act. This is because retirement fund death benefits must be distributed to those who are (either wholly or in part) financially dependent on the deceased at the time of death, which could include a life partner, ex-spouse, minor children, siblings or even aged parents.

All parents, whether married or not, living together, separated, or divorced, are required to support the financial needs of their children, and this duty of support is legislated by the Maintenance Act of 1998 and the Maintenance Amendment Act of 2015. This is because our law deems that both parents are responsible for the maintenance of their children regardless of the living arrangements of the parents, meaning that cohabiting partners share the responsibility of financially supporting their children.

(ii) Common law developments

In recent years, our common law regarding the rights of cohabiting couples has been tested – the result being that development has been made to accommodate the rights of those who choose to live together without getting married with one notable area being that of the intestate rights of the surviving partner. Since the promulgation of the Maintenance of Surviving Spouses Act, which makes it possible for a surviving spouse of a legal marriage to claim reasonable maintenance from the deceased estate until either death or remarriage (but only to the extent that she is unable to provide financially for herself), several aspects of the Act have been challenged – including a 2005 case which found that the right to claim extends to same-sex partners in a permanent life relationship. However, this left a notable omission in respect of the rights of a surviving partner in a cohabiting heterosexual relationship to claim for maintenance which was eventually ruled about in a 2021 appeal to the Constitutional Court (Bwanya v The Master of the High Court). This appeal also challenged the constitutionality of the Intestate Succession Act which in terms of a 2006 ruling made provision for the surviving life partner in a same-sex relationship to inherit in terms of intestate succession but did not confer the same rights on cohabiting heterosexual partners.

In the Bwanya ruling, the court determined that all types of families deserve legal protection including those who choose to live as life partners, and that life partnerships are characterised by a reciprocal duty of support. As such, the court ruled that the Act be amended so that the definition of surviving spouse includes those in a life partnership meaning that the surviving partner should be able to claim maintenance from the deceased partner’s estate if he has failed to do so. Further, the court ruled that the Intestate Succession Act be amended so that the surviving partner in such a relationship can inherit from the deceased partner’s estate if he/she died without a Will.

As the situation currently stands, where cohabiting couples choose to terminate their relationship, there is no legal recourse for the economically weaker partner to claim any form of maintenance from her ex-partner. Many people, particularly vulnerable women, find themselves trapped in life partnerships from which it is difficult to escape financially, especially if there are minor children involved. In January 2023, the Western Cape High Court heard a matter brought by a woman who is asking for reasonable maintenance from her former partner following the termination of their relationship. The first step in the process, however, is to ask the court to declare that common law recognises the existence of a duty of support between unmarried, opposite sex partners where the relationship has ended, following which the applicant can proceed with her application. This is a pending legal matter and it awaits to be seen how the Courts will decide.

(iii) Lack of recognition

So, while there is progress being made, cohabiting couples do not enjoy the full suite of rights that flow from marriage and, without a well-drafted cohabitation agreement in place, can find themselves in a precarious financial position if the relationship comes to an end. For instance, a cohabiting partner that chooses to end the relationship has no claim against the pension interest of the other partner. This is because the member spouse’s pension interest is strictly governed by the Divorce Act, in conjunction with the Pension Funds Act and Income Tax Act, and the right to a share of the pension interest is limited to couples who are legally married. This means that if you are living together, you will have no right to claim a share of your partner’s pension interest should your relationship come to an end. This can be particularly disadvantageous where the non-member partner is a stay-at-home parent while the working partner enjoys the benefit of investing in his employer’s retirement fund. If the relationship comes to an end, the partner who is not a member of a retirement fund will have no right to claim for a share of her partner’s pension interest.

When it comes to ownership of fixed property, cohabiting partners enjoy no protection such as married couples enjoy in terms of their matrimonial property regime. This means that, regardless of the length of the relationship, fixed property belongs to the partner who originally acquired it, and no community of property is established as a result of their cohabitation. This means that if the relationship comes to an end, the other partner has no right to remain on the property – although he/she may have legal course in terms of the law of contract, property or unjust enrichment.

From the above, it is evident that couples choosing to live together should take all steps necessary to protect their respective financial interests should the relationship break down. The first step couples can take is to have a cohabitation agreement drafted which can set out terms for property ownership, reimbursement, and maintenance should the relationship come to an end. It is also advisable for each partner to draft a valid will which clearly sets out the intentions for the distribution of their assets in the event of death.

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