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Changing marriage patterns and their impact on financial planning

A newly married couple should have a shared vision of their future and be prepared to work as a team.

Recently released stats from Statistics South Africa this month show that fewer people are getting married in either civil marriages or customary marriages and that first-time marriage partners are getting older.

The report, Marriages and Divorces, 2019, showed a significant drop in the total number of marriages; in 2019 there were nearly 50 000 fewer civil and customary marriages than in 2018. However, the number of same-sex unions increased between 2015 and 2019.

In civil marriages, the median age of marriage for men increased to 37 and women to 33 (up from 36 and 31 from 2015 respectively). A surprising finding was that while most men marry women younger than themselves, in 2019, of all the ‘never married men’ who married divorced women, 49.7% were either the same age or younger than their new brides. In 2019 the divorce rate was 17.6%.

The report classifies marriage and divorce trends according to three different types of marriages in South Africa; civil marriages, customary marriages and unions and civil unions.

  • The majority of South African marriages (96.6%) are civil marriages registered according to the Marriage Act of 1961, which provides for marriages between men and women. The default civil marriage contract is in community of property.
  • Customary marriages are marriages that are negotiated or concluded according to any of the systems of indigenous African customary law. The Recognition of Customary Marriages Act of 1988 provides for the legal recognition and equivalence of marriages performed under customary laws, including polygynous marriages. Customary marriages must be registered with the Department of Home Affairs within a stipulated time. The Act also allows for dual marriages (marriages that are both customary and civil). The Act is silent on many aspects of dual marriages (for example, whether a civil marriage ‘trumps’ a customary marriage).
  • The civil union marriages enjoy the same rights and obligations as civil marriages. Civil Union Act of 2006 was passed to give legal protection to same-sex couples, but heterogeneous couples can also marry under this legislation if they wish.

Statistics show that South Africans are in step with the rest of the world with respect to the fall in the number of marriages. However, relative to other countries, we have a low rate of divorce. According to 2017 figures, leading divorce-rate countries are Luxembourg (87%), Spain (65%), France (55%) and Russia (51%). At 17.6%, South African divorce rates hover at the other end of the scale alongside Mexico (15%), Egypt (17%) and Turkey (22%).

There could be many reasons for these changing marriage trends and reversal of previous norms with respect to the age of new partners. More couples may feel more comfortable living together, only deciding to marry if and when they wish to have children. On the other hand, in South Africa, the drop in the number of annual civil marriages numbers could reflect large-scale immigration of marriageable age couples.

The three different marriages-types described above are all recognised by the Pensions Fund Act, the Income Tax Act, medical schemes, life insurers and other financial entities. All couples who enter into the marriage-types mentioned above have the choice of a community of property marriage, an antenuptial contract or an antenuptial contract with accrual. The statistics highlight new trends and serve as a reminder to understand the basics when making a decision to marry.

Reciprocal duty of support

Irrespective of the marriage regime, a legal marriage in South Africa creates a reciprocal duty of support which means that each spouse owes to the other a reciprocal duty to provide for the other which can include accommodation, clothing, food, healthcare and other necessities. This means that if the first-dying spouse does not make adequate financial provision for the surviving spouse in terms of their will, the surviving spouse may bring a claim against the first-dying spouse’s estate in terms of the Maintenance of Surviving Spouses Act of 1990 for maintenance.

The steady reduction in the number of civil marriages every year between 2010 and 2019 (between 3 600 less and 41 229 less per annum), added together means that about 770 000 singles will have to continue to take sole responsibility for their financial well-being.

Higher average age of first-time marriage

The increasing average age of first-time marriages has a number of implications. In the event of a first-time marriage between a 37-year-old and a 33-year-old, it is likely that both parties would have pre-marriage savings, investments and retirement plans of their own.

Post marriage, it would be advisable to consider the implications of separate investment portfolios, as well as the impact and implications of any new jointly held assets. It might be worth a chat to your financial advisor to get some advice on the following:

  • If both parties have investments on the same investment platforms which have fee structures that reduce with volumes invested, there could be a case for a joint portfolio in both of their names, which benefit from sliding scale fee structures.
  • If both parties plan to ‘blend’ their investment portfolios over the longer term, (even if there is separate ownership) it is important to ensure that there is diversification across both portfolios.
  • A marriage is often a catalyst to buy a family home. In the current property climate, we would urge newly married couples wishing to buy property to consider ‘soft’ issues (proximity to schools/ work/ work from home possibilities) as well as ‘hard’ issues (long term affordability if the family hopes to live on one salary, prospects of having to sell (and incur transfer costs) in the event of promotion/ emigration. In short, do not fall into the trap of thinking that an owned family home should be automatic or a default decision.

Divorce rate

At 17.6%, the South African divorce rate is low by world standards, but almost one in five marriages end up in divorce. The most vulnerable time for a divorce is between five and nine years of marriage, unfortunately a time when there may be young children involved. Stats SA figures said that 55.9% of divorces during 2019 had children younger than 18 years.

Many divorces are traumatic, disruptive and in most cases, both spouses are financially negatively impacted. The best way of dealing with this is to have agreements in place which ensure that children’s lives carry on as smoothly as possible.

Increasing rate of marriage amongst same-sex couples

Statistics showed that there were 1 771 marriages and 174 divorces amongst same-sex couples during 2019. Same-sex couples are entitled to be medical scheme dependents, nominated beneficiaries of pension fund benefits, and even considered as a spouse in the event of intestate succession (a right not yet accorded to heterosexual couples).

Like heterosexual marriages, same-sex couples can choose between different types of marriage contracts to suit their particular needs and financial arrangements.

If and when you get married …

  • Do the maths before merging your medical aid and/or gap cover

There is a wide range of premiums available to members of medical schemes, and most choices are based on a calculation of likely consumption of health services/ versus premium cost. If one partner has a chronic disease and has chosen a medical scheme with generous benefits and the other is healthy and has an entry-level option, the default decision for one to join the other’s scheme should be re-evaluated. It is worth taking time to weigh up the hassle of the extra administration versus a possibly cheaper overall cost.

  • Update your life insurance policy, your retirement fund beneficiaries and your will

When you get married, it is advisable to familiarise yourself with the terms and conditions of insurance policies, retirement funds and estate law, as specific rules apply to spouses. For example, if the beneficiary of a life policy is the policyholder’s spouse, the proceeds of the policy will not be considered deemed property in the deceased estate and will therefore not be estate dutiable.

With respect to your beneficiary nomination in your retirement fund, remember that your elected beneficiaries are only used as a guideline for the fund trustees. Trustees are obliged to take other dependents into account which could include ex-spouses, children from previous marriages or elderly parents.

Regarding your will, the type of marriage contract you have entered into (community of property, which is the default, antenuptial contract with accrual or antenuptial with no accrual) will dictate the default status of your spouse. For instance, if you are married in community of property, only 50% of your joint estate is yours to bequeath, and any debts must be paid before the surviving spouse inherits their estate. If you’re married with the accrual system and intend bequeathing assets to a third party, remember that your spouse will have a claim against your estate for their share of the accrual.

  • Work towards shared investment and savings principles.

Ideally, a newly married couple should have a shared vision of their future and be prepared to work as a team on mutually agreed on budgets. This is easier than it sounds; many couples are faced with hazards in the form of demanding ex-spouses, entitled, dependent parents or siblings.

Many financial advisors and family offices like Rosebank Wealth Group have had experience of some of these challenges and have become skilled at finding compromises to intra-family financial disputes.

ADVISOR PROFILE

Alwyn Smit

Rosebank Wealth Group (Pty) Ltd

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