The decision to get married requires careful consideration regarding your respective finances. No matter how you choose to structure your partnership, combining financial affairs can be challenging. As such, it’s important to set time aside to select a matrimonial regime that is tailored to your relationship. This guide outlines the primary marital regimes in South Africa and includes information on the financial and legal implications of cohabitation, i.e. those who choose to live together outside the tenets of marriage.
In community of property
If you marry without signing an antenuptial contract, your marriage automatically defaults to in community of property with a single, joint estate. In terms of this marital regime, all assets and liabilities acquired both before and during the marriage merge into the shared estate. While this regime is simple and requires no upfront legal fees, there are a number of risks to be aware of:
- Both spouses require written consent from each other for certain transactions, such a purchasing immoveable property.
- Debt incurred by one spouse is binding on the joint estate, making the estate susceptible to insolvency.
- Upon dissolution of the marriage (through death or divorce), assets and liabilities are divided equally between the two spouses unless a forfeiture order is granted in terms of Section 9 of the Divorce Act.
- Retirement funds form part of the joint estate, and each spouse is entitled to a 50% share on divorce.
Little-known fact: Approximately 50% of marriages in South Africa default to in community of property due to lack of antenuptial contracts.
Out of community with accrual
This marital regime requires the couple to sign an antenuptial contract explicitly including the accrual system. In terms of this regime, each spouse maintains their own separate estate and retains full control of their assets during the marriage. When the marriage comes to an end, the accrual system calculates the growth of each estate from the date of marriage to the date of dissolution and divides the accrued growth equally. Benefits and considerations of this system include:
- A more equitable division of assets that recognises varied contributions, such as income generation and childcare.
- Debts incurred before marriage remain separate from the accrual system, while, during the course of the marriage, debt accrued is included in the accrual calculation.
- Fixed property owned before marriage retains its initial value separately, with only the increase in value included for accrual purposes.
- Retirement fund interests are included in accrual calculations (unless specifically excluded in the antenuptial contract), providing financial security for the non-income-earning spouse.
Little-known fact: The accrual system was introduced into South African law in 1984 to create greater financial equity between spouses.
Out of community without accrual
In terms of this marital regime, spouses specifically exclude the accrual system in their antenuptial contract. Each spouse retains absolute control and responsibility over their individual estates, assets and debts during the subsistence of the marriage. Key points that should be noted include:
- Each spouse enjoys complete independence from the other’s debts.
- There is no sharing of assets or retirement funds upon divorce unless mutually agreed to by the spouses.
- This regime can be potentially disadvantageous for spouses who forego their careers to manage the home or raise the children, as they are not entitled to financial compensation for their contributions.
Little-known fact: Historically, this regime was favoured to protect inherited family wealth and assets from spousal claims.
Cohabitation
South African law provides no legal status to cohabiting couples, irrespective of relationship duration. No automatic duty of support exists between partners, leaving individuals financially vulnerable if the relationship ends without a formal agreement. Important considerations are:
- Signing a cohabitation agreement is strongly recommended to outline financial responsibilities and contributions.
- Each partner maintains separate control over their property and debts.
- There is no entitlement to retirement benefits or automatic inheritance rights exists.
- In the event of separation or death, partners retain responsibility for their own assets and liabilities, risking financial hardship, especially without a valid will.
Little-known fact: In South Africa, a reciprocal duty of support between spouses exists automatically by law, irrespective of the matrimonial property regime chosen. There is no duty of support amongst cohabiting couples.
Critical considerations across all regimes
Debt and insolvency: In an in-community of property marriage, debt poses a significant risk as the actions of one spouse can lead to joint insolvency. Under the accrual system, debt acquired before the marriage remains separate, but keep in mind that any debt incurred during the marriage will impact the accrual calculation when the marriage comes to an end, either through death or divorce. Those married without the accrual or who choose to cohabit remain fully protected from the other’s debt.
Retirement funds: In a community of property marriage, retirement funds are shared equally upon divorce, whereas in an accrual regime, retirement fund values are included in the accrual calculations, offering protection to spouses who contribute non-financially. In marriages without accrual and in cohabiting relationships, retirement funds remain separate, potentially disadvantaging partners who do not generate personal income.
Property ownership: Joint ownership of fixed property applies automatically under community of property. Conversely, the accrual system separates pre-marriage property values and only the appreciation in the asset is included upon dissolution. For those married without the accrual system and those in cohabiting relationships, the non-property-owning spouse is at risk regarding their accommodation rights should the relationship end.
Selecting the right marital regime is fundamental to safeguarding your financial future and ensuring stability and fairness within your partnership. Taking the time to carefully assess your options before marriage can prevent future disputes and financial distress, providing peace of mind as you build your life together.
Have a wonderful day!
Sue
