Old married couple holding hands

Where a couple is married in community of property, they effectively own a joint estate in equal, undivided shares. What many couples don’t realise is that, on the death of the first-dying spouse, the entire estate is wound up which could have unintended consequences for the surviving spouse. In this article, we take a closer look at the process of winding up a joint estate.

Upon the death of the first-dying spouse, as there is no longer a ‘joint estate’, the executor is required to wind up the entire estate. The executor’s first job will be to settle all the liabilities in the joint estate regardless of which spouse incurred the debt or when the debt was incurred (i.e. before or after the date of marriage). This is because spouses to a community of property marriage are jointly and severally liable for all the debt in the estate regardless of whose name the debt is registered in, including all contractual debt, loans, mortgage bonds, and credit cards. Once the executor has paid all the estate’s creditors, the surviving spouse is required to submit a claim for their 50% share of the deceased estate, while the remaining 50% will be distributed amongst the deceased spouse’s heirs and beneficiaries. Given the nature of debt in a community of property marriage, problems can arise where the first-dying spouse is heavily indebted at the time of death.

By way of example, let’s take a situation where a couple, Mr and Mrs Dlamini, are married in community of property. In terms of assets, the couple owns their primary residence which is valued at R2 million and has a unit trust investment with a market value of R3 million. Prior to his death, Mr Dlamini engaged in a failed business venture and now owes his creditors R2 million – something that Mrs Dlamini is unaware of. In his will, Mr Dlamini bequeaths his 50% share of the primary residence to his adult daughter from a previous relationship. After Mr Dlamini’s death, the executor is required to wind up the entire estate and pay Mr Dlamini’s creditors an amount of R2 million, reducing the value of the investment to R1 million*. Mrs Dlamini now finds herself in a situation where she only owns 50% of the family home and has a diminished investment value. In order to survive financially, Mrs Dlamini may need to realise the property although she is hamstrung as her stepdaughter doesn’t want to sell her share of the home for sentimental reasons. As a result of Mr Dlamini’s actions, Mrs Dlamini sadly finds herself in financial difficulties even though she played no part in racking up the debt. Amongst other things, this example demonstrates the importance of having an estate plan and making provision for the surviving spouse.

As the executor is responsible for winding up the entire estate, it is important to note that executor’s and Master’s fees are calculated on the gross value of the joint estate, with all other standard administration costs being payable from the joint estate, with the exception of funeral costs and administration costs relating to assets excluded from the joint estate (if any) which are paid from the deceased’s 50% share of the estate. The result of this is that where the first-dying spouse bequeaths his/her share of the joint estate to the surviving spouse, executor’s and Master’s fees could effectively be paid twice on the same assets. That said, keep in mind that couples are able to negotiate the executor’s fees upfront when drafting their will. When it comes to estate duty, bear in mind that the deceased spouse’s half of the net joint estate is taken into account when determining the dutiable estate, keeping in mind the R3 500 000 spousal abatement.

The death of the first-dying spouse is regarded as a disposal for capital gains tax purposes. Where the first-dying spouse bequeaths his/her share of the joint estate to the surviving spouse, the surviving spouse is treated as having obtained the asset at the same time, at the same cost, in the same currency and for the same purpose as the deceased. However, on the death of the second-dying spouse, capital gains tax will need to be paid. Where the first-dying spouse bequeaths immoveable property in his/her will or where an heir inherits immoveable property in terms of intestate succession, no transfer duty is payable. 

Once the banks and financial institutions have received notification of the spouse’s death, it is possible that the deceased’s bank accounts will be frozen. Thus, if a couple shares a bank account, the surviving spouse could be left in a financially precarious position, keeping in mind that no debt orders can run off a frozen bank account and no transactions can be initiated. While the executor can apply to the Master to have funds released for the maintenance of the surviving spouse, this process can be time-consuming and can leave the surviving spouse financially cash-strapped.

One of the legal consequences of marriage is that it gives rise to a duty of support between spouses. As such, where the first-dying spouse does not make adequate financial provision for the surviving spouse in terms of his/her will, the surviving spouse may bring a claim against the deceased’s estate in terms of the Maintenance of Surviving Spouses Act for the provision of reasonable maintenance needs, and such claim will enjoy the same preference as a maintenance claim from a child dependant.

In closing, it is important for couples in a community of property marriage to bear in mind that only their 50%s share of the net joint estate is theirs to bequeath and that, further, a spouse cannot use their will to remove assets from the joint estate in the event of their death. Community of property marriages bring a number of idiosyncrasies to the estate planning table, and our advice is for all couples to undertake a transparent, comprehensive estate planning exercise to ensure that no difficulties arise in the event of death. 

Have a great day!


* For the sake of simplicity, we have excluded tax from these calculations


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