Many marrying couples tend to underestimate the longer-term effects that their marriage contract has on their financial future and only begin to appreciate its significance when difficulties arise – with debt, divorce, and death being obvious triggers.
YOUR MARRIAGE CONTRACT
In community of property: Marriage in community of property is the default marital regime in South Africa and, as such, it is not necessary for a couple to enter into a written contract. In the absence of an ante-nuptial contract, a couple will be deemed to be married in community of property. At the date of marriage, the couple will be deemed to share a single, joint estate in which each spouse has an equal, undivided share.
Out of community of property (with or without accrual): If a couple chooses to be married out of community of property, they will need to draft and sign an ante-nuptial contract (ANC) before the date of marriage. An ANC effectively sets out the financial consequences of the marriage and can be tailor-made to suit the needs of the couple, provided that the contract is not in contravention of any laws or good morals. If the couple wishes to exclude the accrual system from their marriage, they will need to expressly exclude the regime from their ANC. If not expressly excluded, the accrual system will automatically apply to their marriage. An ante-nuptial contract must be executed by a notary public, who is an admitted attorney authorised by the high court to witness signatures, attest contracts and authenticate the validity of certain documents, such as an ANC. Once the ANC has been signed by all parties, the notary public will forward it to the Deeds Office where it will be registered. Depending on the complexity of the contract, an ANC can cost anywhere from R2 000 upwards and the cost will generally include the registration fee
SHARING OF ASSETS
In community of property: If you are married in community of property, all assets belonging to you and your partner before the marriage plus all assets that you accumulate during your marriage will fall into the joint estate, with the exception of those assets that were inherited, and which were specifically excluded from a community of property estate in the deceased’s will. Once married, each spouse will have an equal, undivided share in the communal estate.
With accrual: Where a couple is married with the accrual system, each spouse retains their separate estate over which they have absolute control during the subsistence of the marriage. When the marriage comes to an end, either through death or divorce, a claim comes into existence for a share of the accrual. The accrual is effectively the net increase in the value of the spouses’ respective estates since the date of marriage. In other words, the spouses share equally in the increase in value of both their estates while the marriage is in existence. However, keep in mind that a spouse’s right to her share of the accrual can only be exercised when the marriage is dissolved.
Without accrual: In a marriage out of community of property excluding the accrual, each spouse keeps a separate estate over which they have absolute control and independence. Each spouse remains the sole owner of any assets that accrued before the marriage as well as those that accrue during the marriage.
In community of property: Because marriage in community of property involves the management of a joint estate, our law makes provision for circumstances where spousal consent is needed for certain transactions. Typically, in a community of property marriage, written spousal consent would be required when selling a joint asset (such as jewellery, gold coins, or an art collection), withdrawing money from the other spouse’s account, selling shares, or cashing in investments. Written consent as well as two witnesses would be required for larger transactions such as the sale or purchase of immoveable property or entering into a credit agreement. Day-to-day transactions such as depositing money, making charitable donations, and other general transactions would not require spousal consent.
Out of community of property (with or without accrual): Marriages out of community of property have no need for spousal consent as the estates of each spouse remain separate.
DEBT AND INSOLVENCY
In community of property: In a community of property marriage, all debt incurred by the spouses before and during the marriage forms part of the common estate, including maintenance obligations to a previous spouse or children from a previous relationship. Being jointly liable for each other’s debts can be problematic, especially in the case of insolvency. If one spouse becomes insolvent, the joint estate can effectively be declared insolvent and all the assets in the estate could be sequestrated.
With accrual: Where a couple is married with the accrual system, only the debt that they incurred from the commencement of their marriage is included in the accrual calculation. Any debt that was incurred prior to their marriage is excluded from the accrual calculation. The right to share in the accrual can only be exercised when the marriage is dissolved which means that the accrual cannot be attached by creditors while the marriage is in existence.
Without accrual: In a marriage out of community of property without the accrual, each spouse is responsible for their own debt and the other spouse cannot be held responsible.
In community of property: When spouses in community of property divorce, the joint estate will effectively be divided equally between the two parties. An exception to this is where one spouse claims forfeiture of patrimonial benefits on the grounds that the other spouse has benefited unduly from the community of property. Once the decree of divorce has been issued, the spouses are required to divide their assets accordingly.
With accrual: In the case of a divorce where the accrual system applies, the accrual must be calculated by taking into account the commencement value of each estate and the extent to which each estate has grown during the marriage. Effectively, everything that each spouse owned before the marriage remains theirs, and the value of everything that accrued during their marriage is shared equally.
Without accrual: Where a couple is married out of community of property without the accrual, each party retains their own assets and liabilities and no redistribution of assets occurs.
RETIREMENT FUND ASSETS
In community of property: Where a couple is married in community of property, the non-member spouse has a claim for up to 50% of the retirement fund assets as of the date of their divorce.
With accrual: In respect of marriages with the accrual system, the member spouse’s retirement fund value is used to calculate the value of the accrual and a claim can be laid to a portion of the retirement fund.
Without accrual: Where a couple is married out of community of property without the accrual, each party retains their own separate estate and there is no redistribution of retirement fund benefits, although the member spouse is free to share the benefit as part of the settlement agreement.
In community of property: Where a party to an in community of property marriage dies, the joint estate is dissolved simply because a joint estate cannot have one owner. The surviving spouse effectively has a claim for 50% of the joint estate, while the other half of the estate will be distributed to the heirs and legatees of the deceased spouse.
With accrual: Where a couple is married with the accrual, it is important to note that the accrual calculation is done at the death of the first-dying spouse. If the accrual of the surviving spouse’s estate is less than that of the deceased’s estate, she can lodge a claim for her share of the accrual against the deceased estate.
Without accrual: Where a spouse who is married without the accrual system dies, he is able to bequeath and distribute his estate as he deems fit. His death will have no impact on the estate of the surviving spouse. However, if the deceased spouse has not made sufficient provision for his surviving spouse, she may have a claim for financial support in terms of the Maintenance of Surviving Spouses Act.
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