Latest / Strictly Business / It's My Money with Charize Beukes

Transcript

It's My Money with Charize Beukes · Strictly Business

• 0:00
  You're listening to Strictly Business Podcast with Lindsay Williams.
• 0:05
  This edition of It's My Money is brought to you by Brenthurst Wealth, your partner
• 0:11
  for global wealth creation.
• 0:13
  Welcome to It's My Money.
• 0:15
  It's My Money is brought to you by Brenthurst Wealth, South Africa's
• 0:17
  multi-award winning boutique wealth manager.
• 0:19
  Now, we tackle some interesting subjects on It's My Money.
• 0:22
  The ones I don't like are tax and death and that sort of thing, but this is an
• 0:28
  interesting one.
• 0:30
  This is marriage or rather not marriage.
• 0:30
  With me now is Cherise Bierkers from Brenthurst Wealth.
• 0:34
  And we're going to talk about not being married and the financial implications of
• 0:39
  not being married.
• 0:41
  Cherise, why did this suddenly come up?
• 0:41
  Is it because a lot of people are deciding to be together, live together, have a
• 0:48
  common law or not common law union?
• 0:50
  But they're not married, but they're still together.
• 0:53
  Hi, Lindsay, and hi to all the listeners.
• 0:55
  Yes, that's definitely true.
• 0:56
  So...
• 0:57
  Obviously, being in my field, we see a lot of clients daily.
• 1:01
  You'd be surprised at how many clients actually recently don't opt to get
• 1:07
  married,
• 1:07
  which is totally understandable.
• 1:09
  I get it.
• 1:09
  But they are also under a misconception with South African law.
• 1:14
  A lot of them come in, we talk about everything, and then they say, no, but we
• 1:20
  are common law spouses.
• 1:22
  And that is something I'm not too sure where that came from, but a lot of people
• 1:26
  have the misconception that.
• 1:28
  You are a common-law spouse.
• 1:30
  If you've been together for 10, 15, 30 years, then you are legally married in the
• 1:34
  eyes of the law,
• 1:34
  which is not the case in South Africa.
• 1:36
  We don't recognize common-law spouses or common-law marriage in the South African
• 1:42
  regime.
• 1:42
  So that's a very common misconception, and it's something we have to clarify to
• 1:48
  clients quite a lot.
• 1:50
  So I just thought it would be good to maybe chat a bit about this.
• 1:52
  It's not a very lengthy subject, but it's just how they can protect their wealth.
• 1:57
  And, yeah, going forward, how they can set up the arrangement to give them the most
• 2:02
  protection.
• 2:04
  I think it's a very good subject, actually.
• 2:05
  And it's mainly young people, I would have thought.
• 2:07
  But you can challenge that view if you want to during our conversation.
• 2:12
  But it's very interesting that South Africa doesn't have a common law.
• 2:16
  Because everywhere I've been in Europe and I'm living in Europe now,
• 2:19
  and I know that you can be with somebody for a few weeks and that person or you
• 2:24
  have...
• 2:26
  certain rights.
• 2:28
  So it's interesting that South Africa has not progressed.
• 2:29
  And I wonder if it's the way that South African society is structured.
• 2:32
  That's not for this conversation.
• 2:34
  But anyway, my personal experience of it is that when I was younger, somebody said
• 2:41
  to me, a chap,
• 2:43
  very well educated fellow, he said, Lindsay, what is your view on marriage?
• 2:44
  Do you think it's an honourable estate, he said?
• 2:47
  Or do you think it's a bourgeois shibboleth?
• 2:50
  And I didn't know what a bourgeois shibboleth was but I just said to him The
• 2:56
  second thing you said, in other words, I thought,
• 2:58
  what's the point of getting married?
• 3:00
  But clearly there is a point in South Africa.
• 3:02
  And let's start with the will, because if one of the partners dies, what happens if
• 3:06
  you're not married?
• 3:08
  Please, Cherise.
• 3:10
  Yes.
• 3:12
  So I'm going to have to go and Google that word after we speak.
• 3:12
  Yeah, shibboleth.
• 3:13
  It's a good idea to do the same.
• 3:15
  But in those days, there wasn't Google.
• 3:17
  So I had to go to the library.
• 3:18
  But anyway, let's start with the will, if we can.
• 3:22
  Yeah, so the will, I would say that is your first line of defense always in any
• 3:29
  situation,
• 3:31
  even if you are married, you're single, if you're not married, it doesn't matter.
• 3:33
  A will is so important and it's all encompassing.
• 3:36
  So the will being your first line of defense.
• 3:38
  So what happens when you should pass away without a will and you're not married,
• 3:42
  then obviously your assets will be distributed according to the South African
• 3:49
  Interstate Succession Act, which
• 3:51
  generally just means it's a very big word just to say that it will go to blood
• 3:53
  relatives.
• 3:55
  So that would be children, parents, siblings, whoever is available and is a
• 4:00
  blood relative.
• 4:02
  That's who your assets will be distributed to.
• 4:03
  So they will have no regard for your partner, even if you have been together
• 4:09
  for, let's say, 15 to 20, 30 years.
• 4:11
  And that is why it's so important to name your partner in your will to also avoid
• 4:16
  that from happening.
• 4:18
  Okay, the will terribly important and terribly important in all parts of
• 4:22
  financial planning, but in particular,
• 4:24
  when you're not married.
• 4:26
  So a very important point that you've made.
• 4:28
  Another very important point is, you know, you've had the argument.
• 4:30
  I've got these, all these images in my head this morning, Cherise.
• 4:33
  You've got the person, the couple has an argument.
• 4:37
  One person says, get out and never darken my doorstep again.
• 4:41
  And the person that's being kicked out says, wait a second.
• 4:44
  It's never darkened our doorstep again, but apparently not.
• 4:47
  What does it mean when you're living together and one person has to leave or
• 4:53
  you decide to sell the place?
• 4:55
  So let's say, let's start with selling the place.
• 4:56
  If you were partners, then obviously, well, let's say if you were married.
• 5:01
  If you were married and you had a house, depending on the marriage regime,
• 5:08
  that would obviously mean that the spouse has an entitlement to that asset.
• 5:13
  Where if you're not married, then there's no entitlement to an asset.
• 5:17
  If your name is not on the deed, the title deed, then you don't have any claim to
• 5:23
  that.
• 5:23
  to that property if it's owned.
• 5:25
  So that means first and foremost, if you are buying a house and you're not married,
• 5:31
  make sure that your name is on the title deed.
• 5:34
  Opt for joint ownership.
• 5:36
  It doesn't have to be a 50-50% ownership.
• 5:38
  It can be an unequal ownership.
• 5:40
  Just opt for joint ownership and get your name on that title deed because that is
• 5:47
  the only defense you are going to have
• 5:49
  and that's the path of least resistance, if I can say that.
• 5:53
  It's obviously very important to get your name on that title deed.
• 5:56
  If you don't have your name on the title deed, it's going to go to litigation.
• 5:59
  It's going to be a lot of back and forth between lawyers.
• 6:02
  You're going to have to basically fight it out.
• 6:06
  And it's going to cost you a lot more than just setting it up in the right way, the
• 6:11
  correct way from the start.
• 6:13
  Yeah, again, I've got an image in my head of a young couple.
• 6:16
  And, you know, they're in the flush of a new romance.
• 6:19
  And suddenly a piece of paper comes in front of them.
• 6:22
  and One of them or both of them say, right, we've got a sign here.
• 6:25
  Sort of takes the romance away a bit in some people's eyes, but it has to be done.
• 6:29
  Get over that.
• 6:30
  What about cohabitation agreements?
• 6:32
  You say, while married couples automatically get legal protection,
• 6:38
  unmarried couples must create their own.
• 6:40
  Again, rather cold calculating paperwork, but essential, Cherise.
• 6:45
  Yeah, that's definitely true.
• 6:47
  So it's not the most romantic.
• 6:50
  things to do.
• 6:51
  But I mean, a lot of things in life isn't and it is required.
• 6:54
  It's just to protect yourself and then ultimately your spouse or your partner.
• 6:59
  So you have to create your own legal protection because you're not
• 7:04
  automatically protected by law.
• 7:06
  And this is where a cohabitation agreement comes in.
• 7:07
  So a lot of people also tell us, why do they need a cohabitation agreement if they
• 7:13
  have a valid will?
• 7:15
  So remember, a cohabitation agreement is there while you are alive.
• 7:18
  So that is something that encompasses everything while you are alive.
• 7:23
  So should you actually split up, then that is where the cohabitation agreement comes
• 7:28
  in.
• 7:28
  So let's say you didn't do a joint ownership on the house,
• 7:32
  but you had a cohabitation agreement in place and that cohabitation agreement
• 7:39
  stated that it defined the asset ownership,
• 7:41
  it defined who pays for what, who shares the expenses and what particular share is,
• 7:46
  it protects your pre-existing wealth, etc.
• 7:48
  Then according to that cohabitation agreement.
• 7:49
  the assets will be distributed.
• 7:51
  So you can make a legal binding document in the form of a cohabitation agreement to
• 7:58
  protect yourself.
• 8:00
  Just remember, the cohabitation agreement has to be drawn up by an attorney.
• 8:03
  I would suggest them to get sound legal advice.
• 8:07
  It's not something you can just draw up on your dining room table and get your
• 8:12
  partner to sign.
• 8:14
  Get the legal advice, get it drawn up by an attorney, and get it notarized by a
• 8:18
  notary public because Thanks.
• 8:20
  This is what actually transforms that cohabitation agreement into an officially
• 8:25
  or an official legally
• 8:27
  binding contract that's recognized by third parties.
• 8:29
  So if you just draw up something on your dining room table, it's not to say it
• 8:34
  won't stand up in court.
• 8:36
  But this having it notarized just means it is an official legally binding document.
• 8:41
  I'm really starting to wonder if this woman's worth it, Cherise.
• 8:48
  And it goes on because we've just had the South African budget and a really good
• 8:52
  budget it was.
• 8:54
  And of course, tax came to the fore during the budget.
• 8:56
  And everyone watches the budget and thinks, you know, is there going to be any
• 9:00
  tax increases?
• 9:02
  Are the brackets going to change and all that sort of thing?
• 9:03
  Married couples will be looking at it.
• 9:04
  Unmarried couples will be looking at it as well because they must be treated
• 9:09
  differently, I think.
• 9:11
  Yeah, definitely.
• 9:12
  So the one overall very good budget, the one thing they didn't.
• 9:16
  Mentioned in the budget is specific tax or special tax treatments for unmarried
• 9:23
  couples.
• 9:25
  And that is what we are to discuss.
• 9:27
  So obviously, if you are married, you automatically get special tax treatment
• 9:31
  between spouses.
• 9:33
  So one thing would be, for instance, donations tax.
• 9:35
  So if you are married, then you can donate to your spouse without paying donations
• 9:41
  tax.
• 9:43
  So these donations are exempt from tax if you are married.
• 9:45
  which is not the case between unmarried couples.
• 9:48
  So you get your yearly 100,000 Rand that you can donate and everything above that.
• 9:54
  you are going to pay 20% donations tax on.
• 9:58
  So that's not something that you automatically get and it's not something
• 10:04
  you can ever get if you're not married.
• 10:06
  So unfortunately that is one of the drawdowns of not being legally married.
• 10:09
  And another one is especially on death,
• 10:13
  they always say there's two things that you always can be sure of and that's death
• 10:17
  and taxes.
• 10:19
  And now we're talking about both.
• 10:20
  So on death you obviously are going to have to pay taxes.
• 10:23
  And that is in the form of a state duty.
• 10:25
  So when you're married, you qualify for a Section 4Q abatement,
• 10:30
  which is just to say that you are exempt from or your inherited assets are exempt
• 10:36
  from a state duty,
• 10:38
  which is also taxed at 20% under certain limitations.
• 10:40
  So that's also something if you fall away or you pass away and your spouse inherit
• 10:46
  or your
• 10:48
  partner inherits from you, you're not married, then obviously there will be an
• 10:52
  estate dutiful.
• 10:54
  tax on that on that inheritance okay so look at the um look at the fine print when
• 10:59
  it comes to to
• 11:01
  tax and let's say you get through all this and you're in retirement and during that
• 11:06
  during the period that you've been together in
• 11:08
  this glorious union you have made some investments again
• 11:12
  is retirement and investments and the creation of investments is that treated
• 11:18
  differently as well so on
• 11:20
  retirement if you've made it that far without being married then I applaud you.
• 11:24
  But on retirement, just remember, very, very, very important point, your RA
• 11:31
  nomination,
• 11:33
  or let's say your retirement annuity beneficiary nominations, override your
• 11:37
  will.
• 11:37
  So please make sure that it's updated.
• 11:40
  It's not a retirement annuity or a pension fund that you took out when you were 18 or
• 11:46
  21 when you started working and you
• 11:48
  never updated that beneficiary nomination to your current partner because...
• 11:51
  even if you have a valid will in place, if this is your second, I don't want to say
• 11:55
  marriage,
• 11:55
  but if this is your second relationship and you didn't name your current partner
• 12:02
  in your
• 12:04
  retirement annuity, it's going to go to your previous spouse, probably if that's
• 12:09
  the person that's nominated on the RA.
• 12:11
  So make sure it's updated.
• 12:12
  That being said, this is something very little people know as well.
• 12:18
  If you have a...
• 12:19
  retirement annuity or a pension fund, that automatically gives the trustees on your,
• 12:25
  let's say on your passing, it gives the trustees of that fund,
• 12:30
  basically the trustees decide on who the benefit goes to.
• 12:34
  So even if you have a nomination, a beneficiary nomination,
• 12:38
  the trustees still decide and depending on the dependency,
• 12:44
  not the relationship status, that is who they will decide to give the benefit to.
• 12:49
  Yeah.
• 12:50
  So it doesn't matter if you load your aunt on there.
• 12:56
  If they decide that your partner was actually a dependent, then that is who
• 13:01
  it's going to go to.
• 13:03
  But that's something you want to avoid by nominating the correct beneficiary in the
• 13:05
  first place,
• 13:05
  because that is a very lengthy process and that can take up to a year to actually
• 13:11
  finalize.
• 13:13
  And then your partner will have to wait for almost a year to finally.
• 13:16
  get the inheritance.
• 13:18
  And that's something you don't really want to do.
• 13:20
  I think that's one that you've really got to sit down with your financial advisor
• 13:26
  on, because that sounds a little bit more complicated than the other ones,
• 13:28
  which seem relatively simple compared to that.
• 13:29
  What about a medical emergency?
• 13:31
  This seems rather obscure to me.
• 13:32
  When I read your article on Biz News, a medical emergency, who thinks about
• 13:38
  medical emergency?
• 13:40
  We're in love, for goodness sakes, Cherise.
• 13:42
  Yeah, this is also one of those not so romantic things to think about.
• 13:46
  But this is what we financial advisors have to deal with on a daily basis.
• 13:49
  And we get so many people sitting in front of us that didn't make the correct
• 13:55
  provisions for these types of things.
• 13:57
  And had they gotten the correct advice beforehand, it would have been totally
• 14:00
  avoidable.
• 14:02
  So what happens in a medical emergency?
• 14:03
  Let's say you become mentally incapacitated or you cannot manage your
• 14:08
  own affairs anymore.
• 14:10
  It's important to note that your partner might not automatically be allowed to make
• 14:14
  those important decisions on your behalf.
• 14:16
  be it medical or otherwise.
• 14:18
  So they may even be locked out of your bank accounts if you become mentally
• 14:21
  incapacitated.
• 14:23
  So that is something to look out for.
• 14:23
  And the solution to that is to draft a durable power of attorney.
• 14:29
  Also have it drafted by an attorney.
• 14:31
  And this has to be done while you are still alive and capable.
• 14:34
  So there should be full mental capacity and you have to know what you are drafting
• 14:41
  and
• 14:43
  signing.
• 14:45
  The other one we spoke about already was the living will, also very important.
• 14:46
  And then a medical power of attorney.
• 14:48
  So a medical power of attorney is something that explicitly gives your
• 14:54
  partner or the person that you nominate.
• 14:56
  the power of attorney to make medical decisions life-saving medical decisions on
• 15:01
  your behalf if you are not
• 15:03
  able to so that is really something that that is important to consider and again
• 15:08
  something that you don't think
• 15:10
  about when you're young and just sort of going into a partnership so and in fact
• 15:15
  everything you've said is something that you don't
• 15:17
  really think about but it's such good advice you say marital status might not be
• 15:22
  what you're looking for but that status offers couple
• 15:24
  couples many protections and frameworks that you as an unmarried couple cannot
• 15:29
  take for granted summing up if you
• 15:31
  would charise you know you're a young couple or even yeah you actually mentioned
• 15:36
  to me off air and this was an interesting
• 15:38
  one before we started this she said second marriages people don't want to have a
• 15:43
  second marriage and so they may be not quite as
• 15:45
  young as they used to be but they're going into a partnership with somebody but not
• 15:50
  going to get married so it's not just young people,
• 15:52
  it's people that have...
• 15:54
  you know, been through it all before.
• 15:56
  Yeah.
• 15:58
  And especially I think it's noteworthy to say that the people that opt not to get
• 16:00
  married,
• 16:00
  if they are a bit older, then obviously they have accumulated a lot of wealth
• 16:06
  already, be it together or separately.
• 16:08
  But a lot of wealth has already been accumulated.
• 16:09
  You probably own a few assets, you own a house, you own property.
• 16:13
  So that is where it becomes essential to put these fail-safes in place just
• 16:20
  to make sure that You are giving yourself the legal protection that the law is not
• 16:26
  going to give you.
• 16:28
  So you are taking matters into your own hands.
• 16:29
  If you want to decide not to be married, that's great.
• 16:32
  But just make sure that you also have the legal protection in place that protects
• 16:38
  you, it protects your spouse,
• 16:40
  and it is essential to have a will.
• 16:41
  If there's one thing that you do today and take out of this conversation is get a
• 16:47
  valid will
• 16:49
  and make sure it's updated.
• 16:51
  That is the...
• 16:53
  the one thing I can definitely say, if anything, that stands out to me the most.
• 16:56
  And then probably second of all, the cohabitation agreement.
• 17:01
  OK, well, all of them are really, really pertinent.
• 17:04
  But as you say, you've ranked them now and you end your article, your excellent
• 17:07
  article.
• 17:09
  You say if you don't do the documentation and all the things that you've just
• 17:12
  recommended,
• 17:14
  you might end up with a great love story and a terrible balance sheet, which I
• 17:17
  think is very neatly put.
• 17:19
  Cherise, thank you very much for your time.
• 17:21
  Cherise Bjork is from...
• 17:23
  Brentos Wealth and that was It's My Money.
• 17:25
  It's My Money was brought to you by Brentos Wealth, an award-winning boutique
• 17:28
  wealth management company.