Getting Married? Consider and plan before you tie the knot!
Although getting married is an exciting time in one’s life, it is important to make an informed decision about the matrimonial property regime you will be entering into before the marriage, as it has extensive implications in respect of your assets, debt, insolvency, divorce and death.
In South Africa, there are two types of marital property regimes namely: marriage in community of property and marriage out of community of property.
If a couple chooses to marry out of community of property, they must enter into an antenuptial contract (ANC) before the marriage, and can choose to either include or exclude the accrual system from the ANC.
If no ANC is entered into before the date of marriage, the marriage is automatically in community of property.
If an ANC is entered into before the marriage, but the accrual system is not expressly excluded from the ANC, the marriage will automatically be out of community of property with/including the accrual system.
MARRIAGE IN COMMUNITY OF PROPERTY
In a marriage in community of property two estates (all assets and liabilities of each spouse) are joined and each party has an undivided half share and a right of disposal over the joint estate.
The assets of each spouse prior to entering into the marriage to each other and the assets accumulated during the marriage forms part of the joint estate.
The only exceptions are for example, where a spouse inherits in terms of a Will and Testament which provides that the inheritance is precluded from any joint estate or payment made to a spouse for pain and suffering in terms of a Road Accident Fund claim, will not form part of the joint estate.
Similarly, the debts/liabilities incurred by each spouse before the marriage as well as the debts/liabilities incurred during the marriage, forms part of the joint estate and both spouses are jointly and severally liable for the debt of the joint estate. This includes all contractual debt, loans, mortgage bonds, credit card facilities and even spousal and child maintenance in terms of a previous marriage. Furthermore, it is important to note that where one spouse becomes insolvent, both spouses will be declared insolvent and if sequestration takes place, the joint estate will be sequestrated.
When married in community of property, certain transactions require written consent or prior
written consent from the other spouse, such as:
- Selling, ceding or burdening insurance policies, mortgage bonds, shares, fixed
deposits, stocks or other financial investments;
- Selling or burdening assets of the joint estate such as art, jewellery or coins;
- Selling immovable property forming part of the joint estate;
- Entering into a contract to purchase immovable property;
- Entering into credit agreements;
- Binding the joint estate as surety for a debt by entering into a contract of surety.
If married in community of property and one spouses dies, the surviving spouse has a claim for 50% of the net value of the joint estate after all the debt of the estate have been settled by the Executor.
Both spouses are jointly liable for the debt incurred prior to and during the marriage, and only after the executor has settled all debt in the estate, will the surviving spouse be entitled to 50% of the net estate. The other 50% will devolve upon the heirs of the deceased in terms of his or her Will, or if he or she has no Will, in terms of the Intestate Succession Act.
The only debts which do not form part of the joint estate, are funeral costs and estate duty. This is payable by the Deceased only and will be calculated and deducted before the distribution of the Deceased’s 50% to his or her heirs.
It is therefore important to note when drafting a Will, spouses married in community of property can only bequeath half of the joint estate, as the other 50% belongs to the other spouse.
It is also important to note that bank accounts held by the deceased as well as joint accounts held by both spouses can be frozen once the bank receives the death certificate. No funds can then be withdrawn, and debit orders cannot be debited from the frozen accounts. However, the executor can apply to the Master of the High Court to release funds for maintenance of the surviving spouse. This unfortunately, is a process that takes time and as a result, can severely affect the liquidity of the surviving spouse.
As briefly outlined above, marriage in community of property can have negative consequences, for example: where one spouse is financially/economically stronger, he or she has to share his or her assets with the economically weaker spouse; both spouses are jointly liable for each other’s debts and this could mean losing everything in case of Insolvency; in death, the administration of the joint estate is a complicated process and in divorce, it is often difficult to obtain joint consent or reach a settlement agreement due to a complete breakdown in communication.
MARRIAGE OUT OF COMMUNITY OF PROPERTY WITH ACCRUAL
This regime is the most appropriate and ideal system when taking into consideration that a successful marriage is based on equality and managed as a partnership.
This regime provides for an equal sharing of the profits (accrual) made by the parties during the subsistence of the marriage.
Assets which the spouses had prior to their marriage can either be included or excluded in the accrual. The net value of the assets of each spouse is declared at the beginning of the marriage in their ANC. Should no assets or commencement value of the two estates be specified in the ANC, it is deemed that the value of the estates at the commencement of the marriage was nil.
Each spouse therefore retains his or her separate estate during the course of the marriage, but can share equally in the growth of each other’s estate during the marriage. When the marriage comes to an end, either by death or by divorce, the net estate values are determined separately, and the bigger estate must then transfer half of the difference to the smaller estate.
However, certain assets such as inheritances, donations non-patrimonial damages and injury compensation are excluded from the accrual.
In the event of death, if the estate of the first dying spouse has the greater accrual, the surviving spouse will have a claim against the deceased estate, but if the surviving spouse has the greater accrual, the deceased estate will have a claim against the surviving spouse. In case of the latter, if the surviving spouse is the sole heir in terms of the Will of the deceased or in terms of Intestate succession, the accrual will not cause a liquidity shortfall, as the surviving spouse will inherit everything anyway. It becomes problematic where part of, or the entire estate is bequeathed to a third party, and the surviving spouse does not have sufficient funds to settle the claim against him or her. Consequently, it is important when drafting your Will and during estate planning, to take your matrimonial property system into consideration and to plan and make provisions accordingly.
MARRIAGE OUT OF COMMUNITY OF PROPERTY, ACCRUAL EXPRESSLY EXCLUDED
In terms of this form of marriage, community of property and profit and loss is excluded by means of an ANC entered into between the spouses. The accrual system must be expressly excluded, otherwise it applies.
The assets of both spouses are separated and each spouse has a full right of disposal over his or her own assets, without prior consent from the other party. This applies to those assets brought into the marriage as well as the assets acquired during the marriage. This also applies to liabilities, which remain their own respective responsibility. The spouses are therefore not liable for each other’s debts and should one spouse become insolvent, creditors cannot claim the assets of the other spouse.
Although there is juristic equality in that each spouse can deal with his or her assets as he or she pleases, there may be financial inequality in respect of contributions made in regard to necessaries of the household. For example, should the husband build up an estate, but the wife’s income is used only for consumable household necessities, the wife has no claim to share of the husband’s estate. The economically weaker spouse does not get to share in the estate of the stronger spouse, even though he or she may have indirectly contributed to the estate by running the household or looking after the children.
This is the most simplistic regime when it comes to the administration of the deceased estate, as there is no accrual claim and spouses can dispose of their assets as they deem fit. When one spouse dies, only the estate of the deceased is wound up, and if the surviving spouse has a claim against the estate such as an outstanding loan, he or she must lodge a claim with the executor of the estate, like any other creditor. If the surviving spouse is left with insufficient support, he or she will have to institute a claim under the Maintenance of Surviving Spouses Act.
This marriage regime may be recommended where both parties already have substantial estates or incomes, and may also be appropriate in cases of second or further marriages. A Will may then be a useful instrument to provide for the other spouse when the marriage is dissolved by death.
In order to ensure that you fully understand the implications of the type of matrimonial property system you choose, contact our offices for more information. Love is blind, avoid marriage being the eye-opener!