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How your marital regime affects your estate planning

Your will needs to align with the rights and obligations that flow as a consequence of your marriage.

In South Africa, a person can leave his assets to whoever he 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.

In community of property

Being married in community of property can limit your freedom of testation to the extent that you only own 50% of the joint estate. Where a couple is married in community of property, they are deemed to be equal owners of the joint estate in indivisible shares. In the event of your death, the joint estate is dissolved because a joint estate cannot be owned by one person. The executor appointed to wind up your estate is required to settle all debt in the estate, bearing in mind that you are jointly liable for the debt incurred both before and during the course of the marriage. Once all debt has been settled, your surviving spouse has a claim for 50% of the value of the net joint estate. The remaining 50% is yours to bequeath in terms of your will and, although you have the right to freedom of testation, this right may be limited if your surviving spouse or minor children have valid claims for support. It is therefore important to take your matrimonial property regime into account when drafting your will. If you are married in community of property, your freedom to testate is limited to your half share of the estate, and you cannot dispose of assets that you do not fully own.

Out of community of property with accrual

If you are married out of community of property with the accrual, it is important to note that the accrual contract continues to apply after your death. On your passing, the accrual comes into action where, effectively, the increase in the real value of the estates of you and your spouse will be added up and divided by two. If your surviving spouse’s share is less than yours, she will have a claim against your deceased estate for her share of the accrual and will need to lodge her claim with the executor of your estate. Conversely, if your share of the accrual is smaller, the executor of your estate will have a claim against your surviving spouse’s estate for your share. From a practical perspective, if you and your spouse bequeath your respective estates to each other, then the accrual should not give rise to any liquidity shortfall in the event of either of your deaths.

However, problems may arise where you leave some or all of your assets to a third party, and this should be taken into consideration when developing your estate plan. For instance, if you die and your estate has an accrual claim against your surviving spouse, she may be forced to realise assets in order to pay her share of the accrual. On the other hand, if your surviving spouse has an accrual claim against your estate, the executor is obliged to pay over her share of the accrual, and this could have financial consequences for your beneficiaries. Also bear in mind that if your surviving spouse fails to claim her share of the accrual, this amounts to a donation and can have tax implications for her.

Life policies can be used effectively to provide liquidity in your estate and that of your spouse in such situations, bearing in mind that such a policy would be exempt from estate duty in terms of Section 4(q) of the Estate Duty Act. Your financial advisor should prepare estate liquidity calculations for you and your spouse to determine whether any shortfalls exist, from the perspective of both the first-dying and the surviving spouse, and these calculations should be reviewed regularly.

Maintenance of surviving spouse

While freedom of testation is one of the cornerstones of the law of succession in South Africa, it must be understood in the context of other important principles – one of which is that when two parties enter into a marriage or civil union, they create a legal bond and a duty of support between them. Before legislative changes in 1990, the right of a surviving spouse to claim maintenance from the estate of a deceased spouse was not established in South African law on the basis that it contradicted the principle of freedom of testation. In terms of our common law, a surviving spouse had no claim for maintenance against the estate of her deceased spouse and, in many instances, widows were left destitute after being disinherited by their spouse. The Maintenance of Surviving Spouses Act was designed to provide relief for widows at risk of being left destitute and, as such, makes provision for a surviving spouse to claim ‘reasonable’ maintenance from her spouse’s deceased estate in certain instances.

While freedom of testation means that no person can benefit from the deceased estate unless that person is included as a beneficiary in the will, this legislation forms one of the few exceptions to this principle, although it is clear that the legislature’s intention was to limit unnecessary interference in this regard.

The act makes provision for a surviving spouse to claim against the estate of her deceased spouse to the extent that she is unable to meet those needs with her own means and earnings. Importantly, the provisions of this 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 husband after his death because the bonds of marriage had already been severed by divorce. Further, the surviving spouse’s right to maintenance from the estate continues until her death or remarriage.

In determining what is regarded as reasonable maintenance, consideration will be given to the amount left in the deceased estate for distribution to heirs and legatees, the duration of the marriage, and the standard of living enjoyed by the surviving spouse during 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. 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.

ADVISOR PROFILE

Craig Torr

Crue Invest (Pty) Ltd

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