Cohabitation: know your rights

Know your rights

YOU’RE happy living together and don’t feel any need to make things official by getting married. But what does this mean for your joint finances – do you have the same rights as married couples when it comes to death, taxes and medical aid?

In terms of SA law, couples who aren’t married aren’t recognised as being in a legal union, even if they’ve been living together for decades and consider themselves life partners. This means their rights aren’t really protected.

In contrast, married couples have specific laws that regulate their union to ensure both parties are safeguarded.

But there are a few laws that cover cohabiting life partners. These are the ones you need to know about. Apart from a spouse or blood relative, anyone who’s dependent on a main member of a medical aid can be registered as a dependant. That means you can be on a life partner’s medical aid, even though you’re not married or related.

If the main member should die, dependants can remain on the fund.

The partner doesn’t have to give up their membership, even if they’re not the main member, as long as the premiums are paid. To register a partner as a dependant on a medical aid, you’ll need the following: ● A certified statement confirming that the main member is the dependant’s life partner. This needs to be done in front of a commissioner of oaths or a police officer who’s legally authorised to administer an oath. ● Complete the application forms. ● Submit a certified copy of the dependant’s ID.

INCOME & ESTATE TAX

The Income Tax Act and the Estate Duty Act include anyone in a permanent relationship with the individual taxpayer in the definition of “spouse”. The requirements of a permanent relationship aren’t defined but both the taxpayer and their life partner must be able to prove that they’re in a permanent relationship (see box, right).

The one tax benefit to permanent couples pertains to donation tax, says Suzanne Marais, a chartered accountant from Cape Town. Donations between partners is exempt from donation tax (which is payable on all donations worth more than R100 000 a year at 20%). So if cohabiting couples donate money to each other, there’s no donation tax payable.

Another benefit comes into play if one of the partners should die, Marais says. Everything bequeathed to a partner is exempt from estate duty. So, for example, if a cohabiting couple buy a home together and one of them dies, but leaves their half (50%) to the surviving partner, there won’t be any estate duty payable on the deceased’s 50% of the property. And the ownership of the property can be transferred to the surviving partner without any transfer duty being payable.

PENSION FUND

A life partner can be appointed as a beneficiary of a pension fund and stands to inherit either the full pension fund value or a percentage of it if the member dies. But the beneficiary must truly be dependent on the pension fund member. The trustees of pension funds are legally obliged to find any and all dependants of the fund member and ensure they receive a payment, even if they aren’t named as a beneficiary.

Every pension fund has its own terms and conditions relating to who’s considered a dependant, but the law states that cohabiting partners qualify as factual dependants. A factual dependant must be able to prove they were financially dependent on the deceased. To prove dependency, pension funds will require at least the following: ● A certified copy of ID ● Certified statements confirming financial dependency and financial circumstances ● A certified statement by a third party confirming the permanent relationship