SIKI MGABADELI: We are focusing on money management within your relationship or marriage. I know, it’s one of those things you don’t want to talk about, but we must. How do you go about ensuring that you both are on the right financial page, and that you don’t find yourselves in financial trouble?
In this regard we are also going to look at the marriage contract that you should be considering before you tie the knot. But if you already have done so, don’t worry. We’ll tell you if you can change things and how you can go about doing that.
If you’ve got some questions about that – maybe you are about to get married or you are married already and you are struggling with dealing with financial issues and talking about it – do give us a call.
We are giving away, like we did last week, a book to the first person today to ask a question. The book is by Douglas Kruger and it’s called Is Your Thinking Keeping You Poor? Fifty Ways the Rich Think Differently.
Welcome to my guests – Maresa Kurz, who is a director at Clarks Attorneys, and Eunice Sibiya, who is head of consumer education at FNB. Thanks so much to both of you for your time today.
This is the most uncomfortable conversation. I think for women, particularly. It is even worse than asking for a raise.
EUNICE SIBIYA: Because you just never know what look you are going to get. And it’s not a romantic topic to discuss. It doesn’t make pillow talk.
SIKI MGABADELI: But why is it important to have it, Maresa?
MARESA KURZ: Just from my side I always try to explain to clients that it doesn’t have to be a negative approach. You are trying to get married, have a happy life together – it’s a partnership. The contract itself solidifies and is an extension of that partnership. So you don’t have to go into it thinking, well, this is my contract in case I get divorced. It’s the management of your money, not necessarily in case of divorce I’ll pull out this lever.
SIKI MGABADELI: I generally go into a relationship already planning for the breakup, so maybe I need to change that.
Let’s start with contracts themselves. When you get married in South Africa, what is the default, what are the different options?
MARESA KURZ: There are several options that you have. The most important of this to remember is that the contract has to be done before you get married. In South Africa you can get married in two different ways – in or out of community of property.
In community means everything is in the same pot – debts, assets, liabilities before or after. It doesn’t matter, it’s all in the same pot.
Out of community of property is what’s yours is yours and what’s mine is mine. You can then in a contract decide – because out of community of property you need to enter into a contract – to add to that to say I’d like to get married with the accrual system. That allows for a sharing of what you accrue during the marriage, and you can set terms in that with things like “I don’t want my pension fund included, or my business,” or “I have R1 million in the bank and I don’t want that included”. So you can choose how you are actually going to structure it in that contract.
SIKI MGABADELI: But you can change when you are in the marriage?
MARESA KURZ: You can enter into a notarial contract, a post-nuptial contract. It is an administrative nightmare and you have to do it through the court. It’s not something that you can just draw up and have registered like an ante- a before-marriage contract. You’ve got to have a Government Gazette notice, you’ve got to give notice to all your creditors, you’ve got to write to your banks, etc. You’ve got to apply to the court and show them the contract and then it agrees whether you can change it or not – because obviously your creditors also have an interest. But it’s not un-doable. It’s not a difficult process, just administratively heavy on the paperwork.
SIKI MGABADELI: So this says to me this is a conversation that’s very important to have, and you must have some sort of an approach to it. Let’s talk about that.
EUNICE SIBIYA: Extremely important, Siki. From the side of finances, it doesn’t matter which option or contract you enter into. Financial management is important for everybody – from a child all the way to a grant recipient or an old person. Whoever has any level of engagement with finances needs to be taught how to manage their finances.
So particularly then for today’s topic, for you as an individual entering into this partnership of whichever kind you are going to choose, you need to have some financial discipline yourself. You are now merging – I’m female, I’m now going to get married to whomever, Mr X, I do not know Mr X’s financial patterns.
SIKI MGABADELI: What he’s been doing—
EUNICE SIBIYA: What he has or hasn’t been doing, what he has and what he doesn’t have. The same applies. He probably saw me wherever, dressed in a particular way, and thought ooh, I like that lady. He doesn’t know my habits, he doesn’t know how much debt I have and all of those things.
So it becomes a problem. People come together on the platform based on love, but there are many other elements that need to get factored into that arrangement and finances is one key element, because almost everything that we are going to do has to have a financial component to it – who buys the groceries, who pays for the car, who pays for the house. And we need to have these conversations before.
I know I listen to lots and lots of conversations and interviews, and people ask at what point do we talk money, once we are dating? Is it three months into the relationship, is it on day one, where he still says “Sis, I think if like you”? Or is it after we are married and we’ve changed the contract and then we ask, “By the way, how much do you earn?”
So I don’t have a definite answer myself. At some point during the relationship one or both of you decide that maybe it’s time that we talk. It is very important.
SIKI MGABADELI: Let’s take a call from Terry in Port Elizabeth. Hi, Terry.
TERRY: Hi. How are you? We are getting married on October 4 but I want to find out about signing the contract either in community or out of community – what are the tax benefits and how does it work? A lot of people have said to me don’t do in community because your tax benefits aren’t as beneficial as what they would be out of community.
MARESA KURZ: Look, I’m not a financial planner, so I can’t really talk to your tax benefits per se. But certainly your concern is if you are married in community of property, you are almost jointly and severally liable in every single aspect. So, for example, let’s say you are entrepreneur and you have a business, and your business goes under, your husband automatically gets attached to part of it, because you are one person for the purposes of your finances if you are married in community of property. So it does create a mechanism to protect yourself, and obviously there would be tax benefits that flow from that for either party.
But I would suggest as to your particular question as to tax benefits that you just give a financial planner a call and find out from a tax perspective what is the benefit. But from a legal perspective, the benefit is that, if you are married out of community of property, whether with or without the accrual, you are a separate legal entity, whereas if you are married in community of property you are a joint singular entity for the purposes of your finances.
TERRY: When one of you has decided what contract you want to put into play, how difficult is it fit in the accrual or take it out or if you’ve only decided – is it easier to do it before marriage or how does it work?
MARESA KURZ: In terms of the accrual system, that’s something that’s included in the contract. So when you go and talk to your attorney now as to the ante-nuptial contract you want to enter into, if you want to get married out of community of property, that contract includes or excludes the accrual system and your attorney can talk you through, like I said, the various sort of provisions on that – whether you want to put exclusions in in terms of property or a financial amount.
But the accrual system allows for you to still share in the benefit of being in this partnership, of sort of working together and creating wealth together. And then, if something had to happen, on death or divorce, you get to share in it. But that is certainly something you do before you get married. You go and speak to your lawyer and you get a contact drafted out of community of property with the accrual, and he can explain all various options to you.
SIKI MGABADELI: Let’s talk about bank accounts. Do we have such a thing as a joint bank account in South Africa?
EUNICE SIBIYA: Many banks used to have what is referred to as a joint account, and I think they are still available. I think that now they have, if I may use the term, fallen out of fashion. I don’t see a take-up of such any longer. But back in the day it was common for some reason that you’d find a couple opting to have a joint account. And they could have a joint account for household purposes, whereas they had separate accounts maybe for their incomes. And for a very long while many years ago I used to see people having a joint account for income purposes as well. So your salary and my salary – both our salaries would go into the one account and then we all worked from that account. And then I used to see trouble, or problems.
SIKI MGABADELI: Why?
EUNICE SIBIYA: Because we would have issued two ATM cards for Mr and Mrs, and Mrs is swiping her way all the way to town, and Mr is trying to count the pennies. Remember when we didn’t have SME notifications, so at the month end when he sees the statement he feels that he has been mugged; and in the meantime he has been mugged by his partner. She’s been shopping and everything.
I don’t see an uptick of those any more, so most people prefer to have their own personal accounts. However, it is important, whichever way you opt to manage your finances, to realise that communication is key. Have ongoing conversations around your money. In fact, it’s healthy to have them monthly, just to make sure we know what’s coming through, is everything okay, and you can plan.
And then if there is any additional – maybe there is a trip or there is a funeral, there is a wedding, there is a shower, there is a gift for someone – those things you can plan in advance. But obviously the basic stuff, the regular, those all need to change.
But I just want to mention a couple of points that I’ve noted here. We underestimate the role of finances in a relationship. Statistics show that finance is one of the key factors that lead to separation and divorce, because people fight a lot. And they fight because they don’t understand the contract that they entered into, like Maresa was explaining earlier. But again they fight just because the two individuals manage their finances differently, extremely differently.
And also again we need to have a structured approach because we are one household. Let’s work towards the same goals. But we need to have sat down and drafted the goals together, agreed as to the goals and the how and when and everything else.
SIKI MGABADELI: Unfortunately we are out of time. We are going to revisit this. We have to, because there are so many questions. Thanks so much to Eunice Sibiya, head of consumer education at FNB, and Maresa Kurz, who is a director at Clarks Attorneys.
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