The decision to get married requires careful consideration with regard to your respective finances. Merging your finances, in whatever format you choose for your relationship, is never easy – and it’s advisable to spend time before your marriage carefully choosing a matrimonial property regime that suits your unique set of circumstances. Any marriage, regardless of the nature of the marriage contract, creates a reciprocal duty of support on each spouse – and the financial consequences of your marriage will have far-reaching effects for both of you. If you’re unsure what form your marriage contract should take, consider the following comparison. For the sake of completion – and for those who are hesitant to tie the knot – we have included the financial and legal consequences of cohabitation.
The only marital regime that requires a contract to be signed is an out-of-community of property marriage. In such circumstances, the contract takes the form of an ante-nuptial contract which either expressly excludes the accrual system, or tacitly includes it. In the absence of an ante-nuptial contract, your marriage will automatically be in community of property and a single, common estate will be formed at the date of marriage. Remember, our law confers no legal status on cohabiting couples and no duty of support exists between two such partners, regardless of the duration of the relationship. It is therefore advisable to enter into such relationships with due caution, with many couples choosing to sign what is referred to as a cohabitation agreement.
While the accrual system may appear somewhat more complex than an in community of property marriage, it is far more equitable. With each spouse retaining their own estate and full contractual capacity during the subsistence of the marriage, the accrual comes into effect when the marriage is dissolved through death or divorce. In terms of the accrual system, the extent to which each spouse’s estate has grown during the course of the marriage is added together and divided equally between the two of them. This is a much fairer way of recognising that each spouse contributes differently towards the success of the marriage in the form of occupational earnings, childcare, home management, and caring for aged parents. In a marriage that excludes the accrual system, a spouse who chooses to stay at home to raise children is at an economic disadvantage because she does not have the same opportunity to create wealth as her income-generation spouse does. In the event of a divorce, the stay-at-home spouse may find herself financially prejudiced as there will be no division of assets, although she may have a claim for maintenance against her spouse. Once again, keep in mind that in the absence of a legal duty of support, a cohabiting partner is free to walk away from the relationship with no financial obligation towards his ex-partner.
The financial consequences of debt in the context of your marriage or partnership are important considerations. One of the most significant disadvantages of an in community of property marriage is that all debt incurred by each spouse – whether before or during the marriage – forms part of the joint estate. If one partner is financially reckless, he can cause the joint estate to be declared insolvent, and the innocent spouse can be left destitute through no fault of her own. Comparatively, the accrual system has a much fairer way of dealing with debt. All debt incurred by either spouse before the date of marriage is excluded from the accrual, and only that debt incurred by each spouse during the marriage is used for accrual calculation purposes.
Very important to take into account is the treatment of retirement funds in the event of dissolution. In terms of the Divorce Act, the non-member spouse may have a claim for a share of the member spouse’s retirement fund benefits (also known as a ‘pension interest’) in the event of a divorce – but this will depend on the nature of the marriage contract. In a community of property marriage, the member spouse’s retirement fund benefits will form part of the joint estate to which the non-member spouse will have an automatic claim to 50%. The only exception to this would be where the court grants a forfeiture order in terms of Section 9 of the Divorce Act where one spouse’s pension interests could be awarded to the other if it is found that the member spouse benefited unduly from the marriage. Where the accrual system applies, the value of the member spouse’s pension interest will be included in the accrual calculation. However, where the accrual system has been expressly excluded, the non-member spouse will have no claim to a share of the member spouse’s retirement fund benefits. In the case of a stay-at-home parent who has not generated any income and who’s been unable to fund towards her retirement, such a spouse may find herself severely compromised in the event of a divorce. The right to share in a member spouse’s pension interest is legislated in terms of the Divorce Act and, as such, does not apply to unmarried couples who have chosen to cohabit.
All marriages dissolve through either death or divorce, and these are therefore the two most important eventualities to consider when choosing a matrimonial property regime.
| In community of property | Accrual system | Out of community | Cohabitation | |
| Coming together | On the date of marriage, a single, joint estate comes into existence | Each spouse retains their separate estate for the duration of the marriage. When the marriage is dissolved, the accrual system is applied. | Each spouse retains their separate estate for the subsistence of the marriage. | Each partner retains their own estate. |
| Contractual requirements | The couple is not required to sign a contract. Their joint estate is an automatic consequence of marriage. | The couple is required to sign an ante-nuptial contract prior to the date of marriage, which must be registered with the Deeds Office. The accrual system is the default property regime when signing an ante-nuptial contract. | The couple is required to sign an ante-nuptial contract before marriage. The accrual system must be expressly excluded from the agreement. | Cohabiting couples are not required to sign any contract. However, it is always advisable that they sign a cohabitation agreement. |
| Key features | All assets and liabilities belonging to you and your spouse are merged into one joint or communal estate, subject to a few exceptions | There is no joining of estates. Each spouse has full and exclusive control over their own property while the marriage subsists. The accrual applies on dissolution by either death or divorce. | There is no joining of estates. Each spouse has full and exclusive control over their own property. There is no sharing of assets on death or divorce. | There is no legal relationship created by living together. |
| Duty of support | A legal marriage creates a reciprocal duty of support on both spouses according to their means. | A legal marriage creates a reciprocal duty of support on both spouses according to their means. | A legal marriage creates a reciprocal duty of support on both spouses according to their means. | There is no legal obligation on either party to provide financial support to the other. |
| Child maintenance | In terms of the Children’s Act, all parents – whether married, cohabiting, or in a relationship, have a legal duty to support their children. | |||
| Fixed property | All fixed property owned prior to the marriage plus all property acquired after marriage falls into the joint estate, subject to certain exclusions such as inherited property. | Only those assets acquired during the marriage are included for accrual purposes. If a spouse comes into the marriage with a property, he/she should record the value of the property in the ante-nuptial contract. The extent to which the value of the property increases during the marriage will be used for accrual purposes. | Whatever fixed property is registered in the name of a spouse forms part of that spouse’s estate. Problems can arise where the marital home is owned in the name of one spouse. If the marriage comes to an end, the non-owner spouse can find herself/himself without accommodation. | Each partner to the relationship has their own estate, including any fixed property. If one partner owns the home in which the couple resides, the non-owner partner may be evicted if the relationship terminates. It may also be difficult to prove that the non-owner partner contributed to the bond and maintenance costs of the property. |
| Debt | All debt incurred both before the marriage and during the marriage is included in the joint estate. One spouse’s reckless financial behaviour can be legally binding on the joint estate. | Each spouse is responsible for debt incurred before and after the date of marriage. However, any debt incurred by either spouse during the marriage will be taken into account when determining the accrual. | Each spouse remains fully responsible for any debt incurred before and after the marriage. | Each partner is fully responsible for any debt incurred before and after moving in together. |
| Insolvency | One spouse can bind the joint estate through his actions which could result in the joint estate being declared insolvent. | The assets of each spouse are protected from the creditors of the other spouse. Only the defaulting spouse’s estate can be declared insolvent. Where one spouse engages in reckless financial behaviour which can detrimentally affect the value of the accrual, the other spouse can bring an application for the immediate division of the accrual to protect her interests. | The assets of each spouse are protected from the creditors of the other spouse. Only the defaulting spouse’s estate can be declared insolvent. | The assets of each partner are protected from the creditors of the other partner. |
| Retirement funds | All retirement funds will form part of the joint estate.
On divorce, each spouse will be entitled to a 50% share of the joint estate. |
The value of each spouse’s retirement funds will be taken into account when determining the accrual. | Each spouse will retain their own assets, including retirement fund benefits, and no claim against each other in respect of pension interest will arise. | Cohabiting partners have no claim to a share of each other’s pension interest. |
| Death | In the event of the first-dying spouse, the entire joint estate will be wound up. The surviving spouse will have a claim for 50% of the net value of the estate. | In the event of the first-dying spouse, the accrual comes into effect. The spouse with the smaller accrual will have a claim against the spouse with the larger accrual for his/her share. | Only the estate of the deceased spouse will be wound up. | Only the estate of the deceased partner will be wound up. In the absence of a will, the surviving partner will not be considered an intestate heir and could be left destitute. |
| Divorce/termination | On divorce, each spouse is entitled to 50% of the joint estate. The only exception is where one spouse is granted a forfeiture order in terms of Section 9 of the Divorce Act. | On divorce, the accrual will come into effect. The extent to which each spouse’s estate has grown during the marriage will be calculated. The difference will be halved and shared equally between the two parties. | On divorce, each spouse will retain their own estate. There will be no division of assets. | When the relationship comes to an end, each partner keeps their own assets and is responsible for their own debt. |
| Advantages | A simpler form of marital regime. No upfront attorney costs. No need to sign a contract. | A fairer and more equitable marital regime. | Each spouse has full contractual capacity and is protected from their spouse’s creditors. | Each partner has full contractual capacity. They are free to terminate the relationship at any time with very little legal implication. |
| Disadvantages | Spousal consent is required for certain transactions. One spouse can indebt the joint estate which can result in insolvency. The innocent spouse’s share of the joint estate will not be protected from creditors. Debt incurred before the marriage is included in the joint estate. | Upfront attorney fees. A more complex marital regime that required careful estate planning. | Can be financially disadvantageous where one spouse stays at home to run the home and raise children. | There is no legal duty of support created by such a relationship, and one partner can walk away at any time leaving the other partner financially vulnerable. |
