In South Africa, a person can leave his/her assets to whoever he/she likes, although this freedom to testate can be affected by your matrimonial property regime. Your marital regime must be taken into consideration during the estate planning process to ensure that your Will is aligned with the rights and obligations that flow as a consequence of your marriage.
(i) In community of property
The nature of this matrimonial property regime: Being the default matrimonial property regime, in the absence of a signed ante-nuptial agreement, marrying couples will be married in community of property and will be joint owners of a single estate in equal, undivided shares. The joint estate will be made up of all assets and liabilities of each spouse, including those debts that were incurred before the date of marriage. On the death of the first-dying spouse, the joint estate will be wound up, and it is important for the surviving spouse to understand the implications of this.
What it means for your estate plan: It is important to keep in mind that each spouse owns 50% of the joint estate and their freedom of testation is therefore limited to their half share of the common estate. Upon the death of the first-dying spouse, the executor will be tasked with winding up the entire estate on the basis that there can be no joint estate if there is only one living spouse. The executor will need to settle all the debt of the joint estate, including that debt which was incurred before the marriage. This means that if the first-dying spouse was a spendthrift who was heavily indebted at the time of his death, the surviving spouse may be left financially compromised once the estate’s liabilities have been settled. Once the estate’s debts have been paid, the surviving spouse will have a claim for 50% of the net value of the estate. The remaining 50% will be distributed in accordance with the first-dying spouse’s will (assuming there is one or in accordance with the law of intestate succession if there is no will.
Important to note: In such circumstances, it is important for testators to keep in mind that their will should only deal with their 50% of the joint estate. Further, keep in mind that bequeathing jointly owned assets to a third party can result in complexities and unintended consequences. For instance, if a testator bequeaths his share of the primary residence to his only daughter, a situation may arise where the property must be sold in order to pay the daughter her inheritance.
(ii) Out of community of property with accrual
The nature of this matrimonial property regime: Where a couple enters into an ante-nuptial contract, they will be deemed to be married with the accrual system unless expressly excluded in the contract. The nature of the accrual is that each spouse maintains a separate estate for the duration of the marriage. When the marriage is dissolved, either through death or divorce, the accrual system comes into effect which means that each spouse gets to share equally in the growth of the two estates calculated from the date of marriage. So, on the death of the first-dying spouse, the increase in real value of the spouses’ respective estate will be added up and divided by two. Again, it is important that both spouses understand the estate planning implications of the accrual calculation on the death of the first-dying spouse.
What it means for your estate plan: Upon the death of the first-dying spouse, his estate will be subject to estate administration with one of the executor’s first jobs being to calculate the accrual. Where the first-dying spouse has the larger estate, the surviving spouse will have an accrual claim against his deceased estate, with this claim being a preferred claim meaning that it must be paid before any portion of the deceased spouse’s estate is distributed. Where the first-dying spouse has the smaller estate, his deceased estate will have a claim against the surviving spouse. Bear in mind that the accrual claim is only acquired on the dissolution of the marriage and, as such, is a contingent as opposed to a vested right. Unless both scenarios have been planned and accounted for in the form of a detailed estate plan, complications can arise which can cause heartache and financial stress for both for the surviving spouse and for the deceased’s heirs and beneficiaries. This is particularly the case where the deceased bequeaths assets to a third party (i.e. someone other than his spouse). For instance, if the first-dying spouse’s estate is smaller, his estate will have a claim against the surviving spouse for a share of the accrual which could result in the surviving spouse being forced to realise assets to settle this debt.
(iii) Out of community of property without accrual
The nature of this matrimonial property regime: Where a couple expressly excludes the accrual system in their ante-nuptial contract, each spouse will retain a completely separate estate both during the subsistence of the marriage and after its dissolution.
What it means for your estate plan: Couples who are married out of community of property are free to bequeath their assets as they deem fit. On the death of the first-dying spouse, her estate will be administered by the nominated executor with no impact on the estate of the surviving spouse. The deceased spouse’s estate assumes full responsibility for the debt in that estate and her creditors will have no claim against the surviving spouse’s estate. In the event of the first-dying spouse, her assets will be distributed in accordance with her will, should there be one, or in terms of the laws of intestate succession which dictate that the surviving spouse stands to inherit from her estate.
Important to note: If the primary residence is owned by the first-dying spouse, the surviving spouse may find herself without accommodation if the deceased bequeaths the property to a third party. Joint financial planning is very difficult where a couple is married without the accrual system although at the very least, each spouse should have some insight into what their financial position would look like should the other pass away.
Maintenance for the surviving spouse
In terms of our law, two parties who enter into a marriage or civil union create a legal bond and a duty of support between them which continues after death. This means that if the first-dying spouse fails to make adequate financial provision for the surviving spouse, the surviving spouse may have a claim for reasonable maintenance from the deceased’s estate to the extent that she is unable to meet those needs with her own means or earnings. Importantly, the provisions of the Act apply only to marriages that are dissolved by the death of a spouse on the basis that a reciprocal duty of support existed as a consequence of their marriage. This means that an ex-spouse cannot claim maintenance from the estate of her former spouse following his death on the basis that the bonds of marriage were severed at the date of divorce. Further, the surviving spouse’s right to maintenance from the estate continues until her death or remarriage.
In determining ‘reasonable maintenance’, the Courts will give consideration to the amount left in the deceased’s estate, the duration of the marriage, and the standard of living enjoyed by the surviving spouse during the subsistence of the marriage. In addition, the surviving spouse’s financial situation, financial obligations and earning capacity will be taken into account. In general, a maintenance claim of this type is settled by way of a lump sum payment from the estate which is somewhat contentious in situations where the surviving spouse remarries in that, upon her remarriage the maintenance obligation falls away but the lump sum that she received from the estate cannot be recovered. In terms of ranking, a surviving spouse’s claim for maintenance falls within the same order of preference as a child’s claim for maintenance.
As is evident from the above, estate planning can be complex – and failing to understand the consequences of your matrimonial property regime on your estate can have unintended consequences for those you leave behind. One of the greatest gifts you can leave behind is a well-structured estate plan supported by a valid will.
Have a fantastic day.
Sue
