Marriage and money: Notes for couples in customary marriage

Many people in customary marriages don’t know that their marriage is in community of property by default – meaning they have an equal share in their estate, including their debt and assets.

This leads them to make mistakes when it comes to their finances. So, if you’re in a customary marriage you need to consider the following:

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1. Be open with your spouse about your income, assets and debts

Your partner should know how much you earn and how much you owe. Your spouse should also know your source of income. You need to show each other statements of your savings and investment accounts.

If you have a retirement fund, your partner needs to know about it. This also applies to debt. Does your spouse know that you have an outstanding personal loan?  Do they know that you have a credit card?

“Proper estate planning is the first thing to do when entering into a customary marriage to limit the financial exposure of your spouse,” says Ernest Zamisa, financial planner at Momentum.  

“By being completely open about your income, assets, and debt, your spouse will not be caught unaware and in danger of losing everything, should something happen to the other party,” he says.

Zamisa says one of the complications of a customary marriage is polygamy.

“The husband should set up a trust for each wife, where property, gifts, and other assets are separated between the wives. It’s almost like getting married in community of property with accrual. Each party states what they come into the marriage with, and then everything accumulated during the marriage can be divided up proportionally on death or divorce,” he says.

“If the right structures aren’t in place with a customary marriage, it’s usually the wives and children that suffer,” says Zamisa.

He says you must make sure there’s a contract in place between all the parties stating income, assets, and debt, and how it’ll be divided to ensure that no one is exposed financially.

Have a contract that excludes the assets with another spouse to ensure that they’re also protected.

2. Update your will

Now that you’re married, you’ll need to update your will to include your spouse if you want them to inherit your property when you pass on. Remember, when you’re married in community of property, your spouse owns half your property, but when you pass on, they don’t necessarily inherit your half.

Drawing up a will help you determine how much of your half goes to them. It’s important to speak to a financial adviser when drawing up a will.

“Make sure that your estate planning is always up to date and relevant. Your will needs to be updated upon marriage. In the case of a customary marriage, you need to break down exactly who gets what, when, and how,” says Zamisa.

He says you must ensure all your children are included, even those born outside the marriage. It’s important to be specific.

A customary marriage isn’t necessarily between two people. There can be more people involved and the parties must be aware of one another. Your marriage must be registered to be able to take the right steps when needed. People often only find out about other spouses in death or divorce.

This can delay winding down the estate, which could lead to the squandering and devaluation of the estate.

READ MORE: Register your customary marriage or lose the right to inherit the estate

3. Get some tax advice

Married people are highly favoured by the South African tax laws. When it comes to your salaries, you’ll pay your taxes separately. However, when it comes to rental income, capital gains, and investment income, tax accrues in equal portions to both you and your spouse.

When submitting your tax returns, you must declare all your income and the South African Revenue Services will divide it between you and your spouse. Also ensure that you produce your marriage certificate and your spouse’s ID.

4. Inform the financial institutions of your name change

Even though you don’t have to change your last name, there’ll be some instances where you’ll be required to provide proof of your relationship.

However, if you do decide to change your last name, make sure you let your insurers, retirement funds, creditors, and banks know about it. This doesn’t have any consequences, but it will save you the trouble of having to prove your relationship when the need arises.

5. Create a budget that includes both of you

Finally, you need to review your spending plan or create a new one. You must know who’s going to pay which bills. Part of being married is sharing responsibilities. You must determine who’s going to pay the mortgage and who’s going to buy groceries.  What is important is that you know where each other’s money is going and help each other where necessary.

“It’s ideal to create a budget for the household and the one earning less should know what is being earned so that they know how much is due to them on divorce or death,” says Zamisa.

“It’s ideal to create a budget for the household and the one earning less should know what is being earned so that they know how much is due to them on divorce or death,” says Zamisa.

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