Proudly sponsored by

Choosing a matrimonial property regime

Exploring the advantages and disadvantages of each matrimonial property regime.

One of the most important decisions to make before getting married is choosing a matrimonial property regime to be married under. Your marriage contract has future financial implications, so it makes sense to get appropriate advice before marrying. Each matrimonial property regime comes with its own set of advantages and disadvantages which are worth exploring.

In community of property

This form of marital property regime is referred to as the default option as no antenuptial contract needs to be signed. In the absence of an antenuptial contract, the couple will be deemed to be married in community of property which may not be the ideal system to be married under.

Advantages

A perceived advantage of this system is that there are no upfront legal costs involved for the preparation of an antenuptial contract. Under this system, all assets and liabilities belonging to each spouse are merged together into one joint or communal estate, subject to a few exceptions. As both parties are effectively working together for the benefit of the joint estate, this form of a marital regime can encourage togetherness, equality and oneness of purpose, although the fact remains that community of property remains a flawed system that has numerous disadvantages. While a single view of the couple’s financial affairs may appear advantageous, the inherent disadvantages are worth noting.

Disadvantages

One of the greatest disadvantages of this marital regime is that the couple remains jointly liable for each other’s debt, including debt that was incurred before the marriage. In a community of property marriage, one spouse has the capacity to bind the joint estate through their actions which can have devastating effects especially in the case of insolvency. If one spouse is unable to pay their debts, their creditors have a claim to the joint estate which can lead to both spouses being declared insolvent.

The management of the joint estate can also be cumbersome as spousal consent is needed in certain circumstances, such as selling fixed property, withdrawing from a joint bank account, or selling assets from the joint estate. Having limited contractual capacity may not be ideal and can cause frustration in the relationship. It is important to note that couples married in community share a credit record which means that reckless financial behaviour on the part of one spouse can negatively impact on the other spouse’s creditworthiness.

When it comes to freedom of testation, bear in mind that each spouse is only entitled to bequeath 50% of the joint estate. This can cause complications where the first-dying spouse does not leave their share of the estate to their surviving spouse. Should the marriage dissolve as a result of divorce, a 50/50 division of the estate may not be an equitable outcome especially where one spouse contributed more to the growth of the joint estate, and this is something worth considering before opting for this marital regime. In certain circumstances, courts will grant a forfeiture of assets where it finds that one spouse stands to benefit unduly from the division of assets.

Out of community including accrual

This type of marital regime involves the couple signing an antenuptial contract which excludes community of property, community of profit and loss, including the accrual system. Under this system, each spouse has the right to share equitably in the value of two estates to the extent that they grew during the subsistence of the marriage. The marrying couple will need to enter into a written antenuptial contract prior to their marriage which sets out the basis of the accrual calculation. 

Advantages

This system is undoubtedly a more fair and equitable system as each spouse effectively shares in the increase in the assets accumulated during the marriage. As such, this system does not disadvantage a spouse who chooses to stay at home to raise children or who has less earning capacity than the other spouse.

Further, because each spouse maintains their own estate, each spouse’s estate is protected from the creditors of the other. Each spouse exercises full control over their own estate and has full contractual capacity, meaning that no spousal consent is required in any circumstances. Further, each spouse remains responsible for their own debt and retains their separate credit record. When entering into the marriage, the spouses can customise their antenuptial contract as they see fit by specifically including or excluding certain assets from the accrual, bearing in mind that if no commencement value is recorded it is deemed to be nil. During the subsistence of the marriage, the position is the same as if married out of community of property, but when the marriage dissolves as a result of divorce or death, each spouse shares equally in the profit and losses made during the marriage. 

Disadvantages

The accrual calculation at the dissolution of the marriage can be somewhat technical and complicated, especially if the antenuptial contract is a complex one. In the event of a divorce, therefore, it is advisable to seek the advice of an experienced divorce attorney. Because each spouse maintains their own separate estate and credit record, a non-working spouse could be prejudiced by this in divorce. If not generating an income, the non-working spouse may not have credit or financing facilities to prove their creditworthiness, and this could affect their ability to obtain financing in their name after divorce.

For the purposes of correctly determining the accrual, it is necessary for the couple to keep accurate records and accounts meaning that this marital regime requires some administrative attention. A notable disadvantage of this system is that the reckless financial behaviour of one spouse can prejudice the accrual. In such circumstances, the other spouse can seek relief from the courts by applying for an immediate division of the accrual. In the event of death, the surviving spouse has a claim against the first-dying spouse’s estate for their share of the accrual which makes estate planning particularly important for each spouse. If the first-dying spouse bequeaths all or part of their estate to a third party, the surviving spouse’s accrual claim takes precedence and the deceased spouse’s beneficiaries can be left without an inheritance.

Out of community excluding accrual

When signing their antenuptial contract a couple who wishes to be married without the accrual system must expressly exclude it from their contract. In doing so, they agree to keep their estates completely separate from each other and retain absolute independence of contractual capacity.

Advantages

Each spouse having full autonomy over their estate means that their estate is fully protected from the reckless financial behaviour of the other spouse. If one spouse incurs debt and is unable to pay their bills, creditors have no recourse against the estate of the other spouse and their estate remains protected against the insolvency of the reckless spouse. Each spouse remains responsible for their own debt and maintains their own credit record. As there is no joint estate or accrual system, each spouse has full freedom of testation.

Disadvantages

Under this marital system, there is no sharing of assets which can make it challenging for couples to find common ground in terms of goal setting or working towards a joint future. Notably, this system can be particularly disadvantageous to a spouse who chooses to stay-at-home to raise children or who does not have the same earning potential as their spouse. In the event of a divorce, the non-earning spouse does not get to share in the estate of the earning spouse, although they may have a claim for maintenance.

Bear in mind that where a couple is married out of community of property after November 1 1984, the courts deem the parties to have expressly excluded the accrual system and therefore no application for forfeiture of benefits can be brought. If a divorcing couple jointly owns property and cannot agree amicably on how to terminate the joint ownership, a spouse may apply to the courts for a directive which may not always be in the other spouse’s best interests.

ADVISOR PROFILE

Eric Jordaan

Crue Invest (Pty) Ltd

Do you have any questions you would like answered by registered financial planners?

SUBMIT YOUR QUESTION SIGN UP AS AN ADVISOR

Get full access to Moneyweb's financial insights and support quality journalism.

Only R63 per month or R630 per year. You can cancel at any time.

COMMENTS   0

You must be signed in to comment.

SIGN IN SIGN UP

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
Moneyweb Insider INSIDERPRO
R1750pm

For financial professionals. Moneyweb's Insider Pro subscription will allow you to promote your financial services to the Moneyweb community.

This subscription includes a
Click an Advisor profile on Moneyweb.co.za.
NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: