Many couples living together refer to themselves as ‘common law spouses’, although this term is misleading and can lead couples to believe that they enjoy certain rights where in fact they do not in terms of South African law. Contrary to popular opinion, living together or cohabitation is not a recognised legal relationship in this country and no legal status is conferred on couples who choose to live together without getting married.
In terms of certain legislation, however, the term ‘spouse’ has been broadened to include cohabiting couples and this can lead to confusion regarding the financial and legal rights of those living together. If you and your partner live together, these are your rights:
When it comes to medical aid and gap cover, the Medical Schemes Act recognises the partner you are living with as a dependant and you will be permitted to add them to your medical aid and gap cover policies as an adult dependant. Similarly, regardless of your marital status, your minor children can be added as child dependants on your policies. If either of you have minor children from a previous marriage or relationship, you may register them as child dependants on your medical aid and gap cover.
When it comes to retirement funds, bear in mind that this is a highly regulated field, and it is important to fully understand your rights in this regard. As a cohabiting partner, you may want to understand your rights to be nominated as a beneficiary on your partner’s retirement fund, and whether you have any rights to claim a share of your partner’s pension fund interest should your relationship come to an end. Let’s examine these two areas separately.
A beneficiary on your partner’s retirement fund
As in the case of a married couple, you and your partner are entitled to nominate each other as beneficiaries on your respective retirement funds. However, it is important to keep in mind that the distribution of retirement fund benefits in the event of a member’s death is regulated by the Pension Fund Act in terms of which the retirement fund trustees are required to make a determination. In doing so, the trustees must take into account everyone who is financially dependent – whether wholly or in part – on the deceased member and distribute the benefits accordingly. Financial dependants can include minor children, children from a previous marriage, elderly parent, or even a sibling that the deceased has been supporting. This means that, while your partner may have nominated you as the sole beneficiary on his retirement fund, the proceeds will not necessarily be distributed as such.
A claim to your partner’s pension fund interest
In the case of married couples who are seeking a divorce, each spouse may have a claim against the other spouse’s pension fund interest. In respect of pension, provident and preservation funds, the pension interest refers to the total benefit the member would have been entitled to if their membership ended due to resignation at the date of divorce. In respect of retirement annuities, the pension interest is the total amount of the member’s contribution up to the date of divorce plus simple interest at the prescribed rate.
Where a couple is married in community of property, the pension interest of each spouse forms part of the joint estate, and each spouse will be able to claim half of the pension interest at the date of divorce. If the couple is married with the accrual system, each spouse’s retirement fund value will be taken into account when determining the value of the accrual. However, the right to claim a share of a member spouse’s pension interest is strictly governed by the Divorce Act, Pension Funds Act and Income Tax Act, and this right 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.
From a tax perspective, cohabiting couples enjoy the same status as married couples. In terms of the Income Tax Act, a spouse includes a ‘same-sex or heterosexual union which the Commissioner is satisfied is intended to be permanent. In the absence of any proof to the contrary, couples living together in a long-term partnership are deemed to be in a union without community of property. As such, the following applies with regard to tax:
Donations tax: The broader definition of ‘spouse’ in terms of the Income Tax Act means that donations between cohabitants are not subject to donations tax.
Transfer duty: Anyone who inherits immovable property is exempt from paying transfer duty on that property, and this, therefore, includes cohabiting couples. This means that if your long-term partner bequeaths property to you, you will not need to pay transfer duty and the conveyancing fees will be paid from his deceased estate.
Estate duty: The estate duty abatement of R3.5 million applies to cohabiting couples that fall within the definition of ‘spouse’ in terms of the Estate Duty Act, and this also includes people who are in a customary union, same-gender or heterosexual unions that the Sars Commissioner recognises as permanent.
Being legally married in South Africa creates what is referred to as 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. In the case of cohabiting couples, no such duty of support exists meaning that your partner has no obligation to provide financial support should you become unemployed, disabled, ill or unable to generate an income. If you lose your economic independence, for whatever reason, this could leave you in a precarious and vulnerable position.
As a cohabiting couple, you are free to nominate each other as beneficiaries on your respective life policies. This means that, should your partner die having nominated you as the beneficiary on their life policy, the proceeds of the policy will be paid directly to you in the event of their death. Further, as you fall within the definition of ‘spouse’ for tax purposes, the proceeds of the policy will not be considered deemed property in their deceased estate and will therefore not be estate dutiable.
When it comes to providing maintenance for children, our law does not take into consideration the marital status of the child’s parents. All parents – whether married or not – are responsible in terms of the Children’s Act for the maintenance of their children.
If your relationship comes to an end for whatever reason, bear in mind that a cohabiting partner has no legal claim for maintenance from the other partner. While married couples can rely on the provisions of the Divorce Act when claiming for maintenance following a divorce, no such remedy is available to life partners who decide to part ways. If you are a stay-at-home parent in a cohabiting relationship, this could leave you in a financially vulnerable position should your relationship come to an end.
The ownership of property when it comes to cohabiting relationships can be particularly tricky, especially if the relationship comes to an end. If you’re living together in a long-term relationship, everything that you buy essentially belongs to you. If your home is registered in your partner’s name, keep in mind that they have the right to evict you from the property if your relationship ends. Many couples find themselves in a position where the property is registered in one partner’s name while the other partner contributes financially towards the bond repayments and the home maintenance. In the absence of a written cohabitation agreement, such financial contributions can be difficult to prove if the relationship terminates, and can severely prejudice the partner leaving them with no claim to the property.
Something that all cohabiting couples need to take into account is that they enjoy no right of inheritance should their life partner die intestate. This means that, in the absence of a will, a cohabiting partner will have no right to inherit from their partner’s deceased estate. Our laws of intestate succession do not confer any legal status on cohabiting partners and, as such, they are not recognised as heirs. The only way to safeguard against this is to ensure that each partner has a valid will in place which specifically names the other partner as a beneficiary.
If you do choose to live together without being legally married, at the very least ensure that you and your partner have a cohabitation agreement drafted and signed which addresses the risks that you face as a cohabiting couple. Further, having a valid will in place will ensure that you are each adequately provided for in the event of a tragedy.