In South Africa there are only 3 possible marital systems for couples who are getting married to chose from. They are:
- A marriage in community of property (this is the default system!)
- A marriage out of community of property with the exclusion of the Accrual system
- A marriage out of community of property with the inclusion of the accrual system
The choice between the 3 marital systems is very important since it will govern how your assets and liabilities (debts) will be dealt with, not only between the two of you, but also between you and other people.
A very important thing to remember is that these consequences will not only apply if you get divorced, but also on the death of one of the couple and also in the event that one of the couple is sequestrated.
As you can see, the choice of marital system and the entering into of an antenuptial contract is incredibly important for estate planning and ultimately to ensure that your assets are safe.
A marriage in community of property (this is the default system!)
The default position in South African law is that if you do not sign an antenuptial contract prior to your marriage ceremony, your marriage is one which is in community of property.
The most significant consequence of being married in community of property is that that you and your spouse’s separate estates will merge and will thereafter become a single joint estate. This entails that you and your spouse become tied co-owners in undivided and indivisible half-shares of all assets and liabilities you have at the time of your marriage and that you acquire during the course of your marriage.
On marriage, the separate estates are automatically merged into one joint estate for the duration of the marriage. This takes place automatically by operation of law. Accordingly no delivery of movable property, registration of movable property and/or cession of rights is necessary.
The risk of insolvency must be considered, as if one spouse is declared insolvent, the other spouse is not protected against creditors of the insolvent spouse.
All liabilities incurred by either spouse can be paid out of the joint estate. Due to the fact that you are liable for each other’s debts, you will also be required to obtain permission from your spouse when concluding transactions that have a bearing on the joint estate. This will inevitably limit your financial freedom.
Upon dissolution of the marriage (by death or divorce), all liabilities are settled from the joint estate and the balance of the joint estate is then distributed equally between the spouses.
In the event of the death of either spouse, the joint estate will be frozen and the surviving spouse will have no control over the joint estate. This may leave the surviving spouse in a precarious financial position until such time as the estate has been wound up.
A marriage out of community of property (with the exclusion of the Accrual system)
If you chose to sign an antenuptial contract prior to your marriage ceremony and you chose this marital regime, then you and your spouse will continue to operate your own separate estates even after the ceremony.
An antenuptial contract is required to regulate the patrimonial consequence of your marriage.
The antenuptial contract needs to be signed before the marriage is concluded in front of a Notary Public and it has to be registered at the Deeds Office within 3 (three) months of the date of marriage.
Your assets and liabilities accrued before the marriage will continue to be yours, and your spouse’s assets and liabilities will continue to be theirs. There is accordingly NO sharing of assets and liabilities between the parties. Each party will own their assets in their own right, as well as be solely liable for liabilities incurred in their own name.
The separation of the estates extends to death, whereby upon the only claim that the surviving spouse will have against the deceased’s estate is that which is left to the surviving spouse in terms of a Last Will and Testament. If the surviving spouse is left nothing, then they will receive nothing!
This marital regime allows for significant financial independence of the parties, albeit at the risk of unfairness – especially if one spouse is the “earner” and the other the “stay-at-home Mom”. This is because the regime does not account for any contributions, whether monetary or otherwise, to their spouse’s estate.
Accordingly, this choice of marital regime is most common among divorcees and older couples who are looking to get re-married.
A marriage out of community of property with the inclusion of the accrual system
The starting point in this marital regime is what has been explained above, being the marriage out of community of property, except that there is an accrual system which is added on in an attempt to create fairness between the parties.
The accrual system refers to the growth in the value of each party’s estate during the course of the marriage.
The accrual system works as follows:
Your assets and liabilities accrued before the marriage will continue to be yours, and your spouse’s assets and liabilities will continue to be theirs. There is accordingly NO sharing of assets and liabilities. Each party will own their assets in their own right, as well as be solely liable for liabilities incurred in their own name.
At the time of the marriage, each spouse declares a “starting value” for their separate estate. That commencement value is recorded in the antenuptial contract.
Upon dissolution of the marriage (by death or divorce), the spouse whose estate has shown a smaller or no accrual, has a claim against the spouse whose estate has shown the greater accrual or increase. In order to determine the accrual, the net commencement value of the parties’ estate is subtracted from the net asset value at dissolution of marriage. Any assets which have been specifically excluded from the accrual are also deducted.
Thereafter, the spouse with the lesser accrual will have a claim against the spouse with a greater accrual for an amount equal to half of the difference between the two accruals. e.g. Your spouses accrual is R10,000 and your accrual is R2,000. Your claim would therefore be for R4,000 – which is 50% of the difference between the two (R10,000 – R2,000 = R8,000)
In the event of the death of a spouse, only the deceased spouse’s estate will be frozen and accrual will then be calculated.
However, a marriage out of community of property and with accrual is not without a catch. There are certain automatic exclusions that apply when calculating the accrual. The following will be excluded from the accrual calculation:
- Any amount awarded to a spouse in terms of non-patrimonial damages. i.e. for personal injury, pain and suffering or defamation.
- Inheritance, legacies and donations remain the property of the beneficiary.
- Donations made between spouses during the marriage are not shared.
- Any further assets which another party wishes to elect to exclude in their antenuptial contract.
This marital regime is ideal for young couples who want to retain their financial independence but wish to start a life together and grow their own separate estates, all while knowing that in the event of the termination of the marriage (death or divorce!) they will be entitled to share in the growth of the other parties estate.
Most young people chose to get married out of community of property but with the accrual.