Financial Consequences of Marriage

When a couple decides to marry, the most important decision they have to make is to decide under what matrimonial property system they are going to marry. That is, they need to decide if they are going to get married in community of property, or out of community of property, with accrual or without accrual.

Source: A simple guide to South African Family Law by Nthabiseng Monareng
Marriage in community of property applies automatically when a couple enters into a marriage and they do not sign an Antenuptial contract excluding community of property.
Under community of property, the couple become joint owners of all the assets (property and money) and liabilities (debts and claims) they acquired before they got married and also those they acquire during the marriage.
Assets
Not all assets form part of the joint estate. The following will be excluded from the joint estate:
1.    Assets that have been excluded from the joint estate in the antenuptial contract
For example, the husband has a house. He decides that he does not want it to form part of the joint estate. The couple has to sign an Antenuptial contract excluding the house from the joint estate. If the husband rents out the house, the rent will form part of the joint estate unless it is stated in the antenuptial contract that the rent will not form part of the joint estate.
2.    Assets excluded by will
If a parent leaves an inheritance for his or her child in a will, that parent has to state specifically in the will that the inheritance should not form part of the joint estate of the child and his or her spouse. If a parent does not state this in a will, the inheritance will form part of the joint estate.
3.    Engagement gifts
These are gifts couples give to each other and also those they get as a result of their engagement.
4.    Non-patrimonial damages
This is money acquired by a spouse for a delict committed against them where the money is awarded for loss other than financial or property loss, for example damages for harm to their good name and reputation in an action for defamation, or damages for pain and suffering in a personal injury claim.
Be alert!
Although some assets do not form part of the joint estate, this applies to the spouses themselves and does not affect third parties, mainly creditors. If one of the spouses owes creditors, the creditors can attach the assets of both spouses irrespective of whether or not the assets form part of the joint estate.
Liabilities
Liabilities incurred before the marriage and during the marriage become part of the joint estate. This includes student loans, car loans, personal loans, bonds and so on.
When one of the spouses has been sued and is liable for a debt, the creditor can:
·         recover the debt from that spouse’s separate estate, if there is one; or, if there is insufficient money,
·         recover the money from the joint estate.
The creditor need not first try to recover the money from the separate assets of the spouse who incurred the debt, unless the claim is for damages for a delict committed by that spouse. In all other cases, the creditor has the right to sue both spouses jointly and to recover the money from the joint estate.
Administration of the joint estate
There are certain transactions that both spouses must agree to before they can be performed.
Written consent is required from both spouses in the following instances:
·         Selling or buying a house or other building or land forming part of the joint estate.
·         Taking out a mortgage bond on a house or other building or land forming part of the joint estate.
·         Signing as a surety for someone else.
·         Entering into a hire purchase or other credit agreement.
·         Ceding or pledging shares, insurance policies, mortgage bonds, fixed deposits, investments forming part of the joint estate.
·         Withdrawing money credited in the name of the other spouse in any bank account.
Written consent must be witnessed by two witnesses.
Verbal consent is required in the following instances:
·         Obtaining your spouse’s remuneration; money obtained from his separate property, for example rent, inheritances, donations, or money he or she won in a prize.
·         Selling or giving away furniture or household goods.
If a spouse enters into a transaction without obtaining the written consent required, that transaction may be declared invalid, if the third party knew or could reasonably have known that the spouse did not have consent from the other spouse.
There are times where a spouse will enter into a transaction with a third party without the consent of a spouse and the third party did not know and could not reasonably have known that the consent was not given. In this case the transaction will be valid. That means that the other spouse who did not give consent will be bound by that transaction.
Protection between spouses
1.    If a spouse wants to enter into a transaction and the other spouse withholds the consent, the spouse who requires the consent can apply to the High Court for permission to continue with the transaction without the other spouse’s consent. The court will give the consent if it is satisfied that the other party is being unreasonable.
2.    The spouse who suffers financial loss as a result of a transaction which he or she did not consent to can claim back the share of the money he or she lost at the dissolution of the marriage. This means that an adjustment has to be made when the joint estate is divided at the end of the marriage so that the money lost can be recovered from the other spouse.
3.    If one of the spouses is reckless with the assets of the joint estate, or is misusing money, and the other spouse fears that he or she will suffer serious prejudice, the latter spouse can apply to court to have the joint estate divided immediately. The applicant must show the court that:
–          His or her interest in the joint estate is being seriously prejudiced or will be prejudiced because of the conduct of the other spouse.
–          No other person will be prejudiced if the estate is divided at that stage.
Advantage of community of property
·         You and your spouse share assets and liabilities equally.
Disadvantages of community of property
·         Your spouse will be entitled to half share of your estate, even if he or she did not contribute anything.
·         Your spouse may incur debts without your knowledge and these debts may form part of and be recoverable from the joint estate.
 
Dissolution of the joint estate
Dissolution of the joint estate will occur under any of these three circumstances:
·         Change from in community of property to out of community of property.
·         Divorce.
·         Death.
Marriage out of community of property
If a couple decides to get married out of community of property, they have to conclude an Antenuptial contract. This is a contract that a couple signs before they get married. In it they exclude community of property or certain benefits that they do not want to form part of the joint estate.
The couple have to decide if they want the accrual system to apply to their marriage or if they want their marriage to be without the accrual system.
Marriage out of community of property with accrual
·         During the marriage each spouse controls his or her own assets, and is responsible for his or her own debts.
·         On the dissolution of the estate, by death or divorce, the value of each spouse’s assets obtained during the marriage will be calculated, and the spouse whose estate has grown less than the other’s estate during the marriage will get half the difference between the growths in their respective estates.
Example of the accrual system
Mpho and Thabo are married out of community of property with the accrual system. When they got married, Mpho had assets worth R10 000 and no debts. Thabo had R50 000 and no debts. Three years later they decide to get a divorce. At the time of divorce, Mpho’s net estate is R80 000 and Thabo’s net estate is R250 000. Taking into account the decline in the value of money over the period of their marriage (say the value of money, measured using the Consumer Price Index, has fallen by 10% over those three years) the recalculated net commencement value of Mpho’s estate is now R11 000 (R10 000 x 1,10) and that of Thabo’s estate is R55 000 (R5 000 x 1,10).
Calculation of the accrual
Mpho
·         Net value at time of divorce: R80 000
·         Minus net commencement value: R11 000
·         Accrual: R69 000
Thabo
·         Net value at time of divorce: R250 000
·         Minus net commencement value: R55 000
·         Accrual: R195 000
Thabo’s accrual is higher than that of Mpho. As a result, Mpho will claim half the difference from Thabo’s estate.
          R195 000 – R69 000 = R126 000
          Divide into two (2)
          = R63 000
Mpho will receive R63 000.
Advantages of community of property with accrual
·         Creditors of one spouse cannot attach the other spouse’s separate estate.
·         Spouses are liable for their own debts.
·         Each spouse is free to do as they want with their assets and they do not have to get the consent of the other spouse to enter into transactions.
Disadvantages of community of property with accrual
·         There is equal sharing of the growth of the spouses’ estates during the marriage, but no sharing of what the other spouse brought into the marriage, that is, what he or she owned at the time of the marriage.
·         One spouse can leave the marriage with a substantial amount of money and a large estate while the other leaves with a smaller amount and smaller estate.
Marriage out of community of property without accrual
If spouses do not want to share each other’s assets and debts and upon the dissolution of the marriage they do not want to share anything, they must specify in the Antenuptial contract that they want their estate to be out of community of property without the accrual system.
Advantages of community of property without accrual
·         You do not share your assets with your spouse, and on the dissolution of the estate, you get your whole estate.
·         Spouses are liable for their own debts. Creditors of one spouse cannot attach the other spouse’s estate.
Disadvantage of community of property without accrual
·         If you are not working and were financially dependent on your spouse, upon the dissolution of the marriage, you will not be entitled to any property from his or her share. You may get only spousal maintenance.
Changing the matrimonial property system
It is possible for a couple to change their matrimonial property system, from community of property to out of community of property, or the other way around.
Be alert!
It is important to note that it is an expensive procedure to change your matrimonial system. It can cost from R15 000 to R30 000, or even more.
Postnuptial agreement
Married spouses have to make a joint application to the High Court for an order known as a postnuptial contract.
Usually an attorney or advocate is needed to make the application.
In the application:
·         The spouses have to show that they have good reasons for wanting to change from in community of property to out of community of property, or from out of community of property to in community of property.
·         The spouses must give notice of the proposed change to all their creditors.
·         The spouses must show that no other person will be prejudiced by the change.
Procedure for making the application
 
1.    The application to change the system has to be made to the High Court.
2.    A notice of the application has to be given to the Registrar of Deeds. This has to be accompanied by the draft document of the postnuptial contract.
3.    The notice must also be published in the Government Gazette and in two of the local newspapers at least two weeks before the application will be heard in court.
4.    Creditors must be informed about the application.
5.    The spouses have to give information about their finances, assets and liabilities to enable the court to decide whether there are good reasons to make the change and that no one will be prejudiced by the change.
6.    The spouses must show the court that creditors will not be affected by the change.
If the creditors object to the change and show that they will be prejudiced if the matrimonial property system is changed, the court will not allow the change, or may allow the change with conditions.
If the court grants permission to change the property system, the couple must register their postnuptial contract at the Deeds Office. Their matrimonial property system will then be the one set out in the postnuptial contract.
General notes about financial consequences of marriage
1.    Antenuptial contracts have to be signed by the parties before an attorney called a notary before the marriage takes place. They must be registered at the Deeds Office within three months from the date of the marriage. After this three-month period, the Antenuptial contract can be registered with the consent of the court.
2.    A court application must first be made to register the Antenuptial contract, and this is expensive.
3.    You cannot conclude an Antenuptial contract once the marriage has taken place.
4.    If you are about to be married, think carefully about the matrimonial property system that you want to enter into. Do not enter into a system that will prejudice you in the future.

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