Couples may have a “what’s mine is yours” approach when they are in a long-term relationship, however, this kind of approach to financial management does have some risks.
Johan Strydom, Product Head at FNB Fiduciary said that couples that approach their finances this way in their relationship will face financial issues and a difficult choice if one person passes away.
“It is vital that couples enter into this type of financial relationship with their eyes open to the potential risks it presents,” Strydom said.
Strydom shares two scenarios that can lead to challenges when partners share finances:
Scenario 1: Sharing bank accounts
Couples that share a bank account will face problems when the primary account holder passes away because the bank is required by law to freeze the account until the estate of the deceased person has been fully processed.
According to Strydom, it is a difficult situation in a joint arrangement because the surviving partner will be unable to access the account, or the money in it, until the process of winding up the estate is completed.
Scenario 2: Home loan
Couples who are co-applicants on home loans can face problems if one partner passes away.
Strydom said: “When one of the co-applicants on a bond passes away it impacts the entire credit agreement with the bank which means that, in terms of the bond arrangement, the total amount owing on the loan will need to be paid back to the bank.”
There are some rules of that couples should adhere to in regards to their finances:
– If couples have a joint bond, they should ensure that both parties have adequate life insurance in place to cover the full amount of the bond.
– Partners that only use one bank account should also consider opening separate bank accounts to ensure they have access to money to take care of expenses should their partner passes away.
IOL Business