A marriage contract is not just about divorce; it defines what happens to your finances while you are married. Not formalising your relationship could cost you more than you realise.

When Melanie and John decided to get married after living together for 29 years, it was not for romance but rather for practicality.

“In September last year my brother was in a very serious car accident and was on life support for several days. It struck me then that, as John and I were not married, John would have no say over my future if I was in that situation – yet John is the only person I would want making that decision,” says Melanie.

At that point the couple discussed a power of attorney but nothing came of it until they were faced with a financial dilemma. While no one likes to talk about death, tax is another matter altogether. When the couple decided they wanted to buy a property together earlier this year, they were faced with a financial shock.

“Although we would be joint owners, John was putting in 80% of the capital. Our accountant informed us that this would trigger a donations tax event. John was going to have to pay around R200 000 in donations tax!” says Melanie.

Soré Cloete, Senior Legal Manager at Old Mutual explains that if a couple are not married, then not only would donations tax be payable but should one of them pass away, the surviving partner could face both estate duty and capital gains tax on that property.

For 29 years Melanie says there was never an issue in terms of the couple’s finances. She has signing powers on John’s bank account and his medical scheme recognised her as a partner – even when she was diagnosed with a serious illness, the medical scheme did not question the relationship. “It is only SARS who has a problem with recognising a common-law marriage” says Melanie.

Zola Mtshiya, head of communications for the Board of Healthcare Funders (BHF) says that if a couple are living together without a marriage contract, the one can belong to the other’s medical aid.

“There is an extended definition for a dependant in the medical schemes act where ‘dependant’ can include a partner in respect of whom the member is liable for family care and support,” says Mtshiya who adds that some schemes may ask for an affidavit for proof of the relationship.

Although Melanie and John got married for purely practical purposes, Melanie admits that it has fundamentally changed their relationship.

“I was the biggest cynic in the world about marriage. Both John and I had been married previously and we had not been very happy in our marriages. Our relationship worked for us so it made no sense to get married,” says Melanie.

Yet somehow, unexpectedly, getting married has made a difference. “It added such a different dimension to our relationship. It is fascinating that a piece of paper can make a difference – but with the right person this time it did,” says Melanie who adds that she always felt that by not getting married she was making a statement. “I was saying ‘I choose to be in this relationship because I want to, not because I am married.’”

Yet Melanie says she now realises that this was in some ways a fictitious reality. “You are so enmeshed financially after all these years that it would have been difficult to separate anyway. We may as well have been married. You are in the same situation but with no protection”.

David Knott of Private Client Holdings says that our courts have decided that where a heterosexual couple merely live together without the benefits and obligations of marriage, the surviving partner does not qualify as a spouse and could therefore not claim maintenance. “On the other hand, there is a decided case confirming that the surviving partner in a same-sex relationship would be considered a spouse. However this case was heard before the adoption of the Civil Union Act in 2006, when it was not permissible for same-sex couples to enter into a marriage-like arrangement. It would be interesting if that case were to be challenged now,” says Knott.

Melanie says that when the couple met she had a really good job and earned well, but once her stepson (John’s son from his previous marriage) became a teenager, the couple felt it would be better for Melanie to have a more flexible work situation, so she could be home more.

“I wouldn’t say I sacrificed my career, but because John focused more on his career than I did, he has made more money,” says Melanie who adds that while she always considered herself to be financially conservative, she didn’t think about what would happen if John left her.

“Although I doubt it would ever have happened, if he had left me, I could have been left on the street with no claim to anything. That is very scary.”

What was supposed to be a secret courtroom marriage turned into a proper wedding with family, a wedding dress and two very excited grandchildren.

“It was a really special day. It has been amazing, it has added a new dimension, new tenderness and a new chapter in the relationship. From being someone who actively campaigned against marriage, I am now its biggest advocate. I guess SARS has done me a big favour,” laughs Melanie.

The marriage contract

Melanie and John decided to get married out of community of property (COP) by signing an antenuptial contract with accrual. The couple did not declare any individual assets entering the marriage as they had amassed their money together over the last 29 years.

“In effect we are sharing everything as one would in community of property but this way I don’t need his signature to open an account,” explains Melanie. It also means that their debts remain separate and neither one would be liable for the other’s debts, unlike the COP where the spouse is liable for their partner’s debts.

Soré Cloete, Senior Legal Manager at Old Mutual says another option for a couple who do not wish to get married but want recognition as a spouse in terms of the Income Tax Act and Estate Duty Act, is to opt for a civil union. A civil union can also be used for same-sex couples who want the same legal rights as spouses under the Marriage Act.

Whether you are married under the Marriage Act, The Recognition of Customary Marriages Act or the Civil Union Act, there are three marital regimes you could consider:

In community of property: The partners share all their assets and each is entitled to half the other partner’s assets.  What each partner brings into the marriage and everything they accumulate is shared 50/50.  It also means they share all debt incurred by either of them. An antenuptial contract is not required for this marital regime, and unless you sign a separate antenuptial agreement, you are automatically married in COP.  Upon death or divorce, the joint estate will be ‘split’ in two to provide each party her/his share.  This means that in a will, each party can only bequeath his or her half of the estate.

Out of community of property, without accrual: Each partner retains his or her assets, what they had before the marriage or bought thereafter.  The partners are not liable for each other’s debts.  Upon death or divorce, each party retains his or her estate.

Out of community of property, with accrual: Each partner retains his or her assets, what they bring into the marriage or bought thereafter.  The difference here from without accrual is that the partners share in the growth of assets after the marriage. The difference in the growth accumulated will be divided equally upon death or divorce.  The partners are here also not liable for each other’s debts.  Upon death or divorce each party retains his or her estate, but the party with the larger growth in assets has to pay the party with the lesser growth in assets for the “shared accrual”, ie the difference between the accruals divided in half.