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The impact of your marriage contract on your financial planning

The legal consequences flowing from your marriage contract affect your estate structuring, tax obligations, maintenance obligations, debt, etc.

The nature of your marriage contract or permanent relationship has financial and tax consequences which should be taken into account when developing your financial plan. The legal consequences flowing from your marriage contract affect your estate structuring, tax obligations, duty of support, maintenance obligation, spousal support, debt, as well as the division of assets should your relationship come to an end through death or divorce. As a result, it is important to fully understand the financial implications of how you are married or how your long-term partnership is structured. Let’s have a look.

Our law makes provision for a number of different forms of marriages, with different legal and financial consequences flowing from each. Generally speaking, you have the option to choose between a civil marriage, civil union, or customary marriage.

Civil marriages

A civil marriage in terms of the Marriage Act of 1961 can only be entered into between a man and a woman and is the most common form of marriage in South Africa. When entering into a civil marriage, in community of property is the default matrimonial property contract unless the couple chooses to enter into an ante-nuptial contract. In doing so, the couple can choose to be married with the accrual system, being the default option for out of community marriages, or to expressly exclude the accrual system.

Civil unions or partnerships

After the introduction of the Civil Union Act of 2006, South Africa became one of the first countries in the world to give legal protection and marriage benefits to couples in same-sex relationships. However, contrary to popular belief, a civil union marriage is not limited to couples of the same sex and extends to couples of opposite sexes. What is important to note, however, is that civil union marriages enjoy the same rights, responsibilities and legal consequences as civil marriages and that there is essentially no difference between a civil marriage and a civil union. As in the case of civil marriages, the marriage must be registered with the Department of Home Affairs.

Customary marriage

The Recognition of Customary Marriages Act of 1998 provides legal recognition for those married in terms of African customary law. In terms of this piece of legislation, legal recognition is provided for both monogamous and polygamous customary marriages provided that the marriage is celebrated according to the prevailing customary law of the community. Once married, the couple is required to register their marriage with the Department of Home Affairs within three months. In the case of polygamous marriages, the groom is required to apply to the High Court for an order that regulates the matrimonial property system of his various marriages in order to protect all the parties to the marriages.

As legally recognised marriages in South Africa, parties married in terms of a civil marriage, civil union and customary marriage can choose whether to marry in or out of community of property, with in community of property being the default matrimonial property regime for all three types of marriages.

Couples in a legal marriage can choose from the following three matrimonial property regimes:

(i) In community of property

In the absence of an ante-nuptial contract, a marriage will be deemed to be in community of property, and this can have important financial consequences for both parties. Under this system, all assets and liabilities belonging to each spouse are merged together into one joint estate. A major disadvantage of this form of marriage contract is that the couple is jointly liable for each other’s debts, including those debts which were incurred before the marriage. Further, one spouse can bind the joint estate through their actions which could lead to the joint estate being declared insolvent.

When it comes to freedom of testation, it is important to bear in mind that each spouse can only bequeath 50% of the joint estate in the event of their death as the other half belongs to the surviving spouse. Where a spouse to an in community of property marriage dies without a will, the surviving spouse will inherit in terms of intestate succession. In the event of divorce, keep in mind that each spouse is entitled to 50% of the joint estate which can lead to an inequitable distribution of assets where one spouse contributed significantly more to the estate than the other. 

(ii) Out of community of property without the accrual

When signing the ante-nuptial contract, couples choosing this form of matrimonial property contract must expressly exclude the accrual system. Under this type of contract, each spouse retains their own separate estate, including all assets and liabilities. Each spouse has full autonomy over their financial affairs and their debts are kept separate. As such, each spouse’s estate is protected from the other spouse’s creditors. When it comes to estate planning, each spouse has freedom of testation and is free to bequeath their assets as they choose. However, as the duty of support is a legal consequence of marriage, the surviving spouse may have a maintenance claim against the deceased estate in the event that they are not adequately provided for. Where a spouse dies without a will, the surviving spouse may inherit according to the rules of intestate succession. 

(iii) Out of community of property with the accrual

The accrual system is a much fairer matrimonial property regime as it provides each spouse with the right to share equitably in the value of the two estates to the extent that they grew during the course of the marriage. In terms of the accrual system, each spouse exercises full control over their own estate and has full contractual capacity. In addition, each spouse is responsible for their own debt and their estates are protected from their spouse’s creditors. When the marriage comes to an end either through death or divorce, the growth in each spouse’s estate during the subsistence of the marriage is calculated and shared equitably between the two spouses. As such, in the event of divorce, the spouse with the smaller estate will have a claim against the spouse with the larger estate for their share of the accrual. Similarly, where the spouse with the larger estate is the first-dying, the surviving spouse will have a claim against his deceased estate for her share of the accrual, making estate planning particularly important for the couple. 

Religious marriages

This type of marriage is one entered into in terms of a religion, such as the Islamic and Hindu faith, although it is generally not recognised in our law. However, in certain circumstances, limited protection is granted in respect of spousal support and inheritance rights. A spouse in a religious marriage has the right to approach the Magistrate’s Court for maintenance from her deceased’s spouse estate. Further, where a spouse in a religious marriage dies without a will, his surviving spouse may inherit in terms of the law of intestate succession.

Domestic partnerships

Where a couple, whether same or opposite sex, chooses to live together without formalising their relationship under the Civil Union Act, their relationship is not regulated by law and this can have far-reaching legal and financial consequences. Our law confers no legal status on cohabiting couples and, as such, no duty of support exists between couples living together. This means that, if the relationship comes to an end, one partner will not be able to claim maintenance from the other partner even if she was financially dependent on him during the relationship.

Note, however, the same does not apply to child maintenance as in terms of our law both parents have a legal duty to support their children regardless of their marital status. Importantly, a cohabiting partner does not have the right to inherit from her deceased partner if he dies without a will as the law of intestate succession does not recognise the inheritance rights of domestic partners. Further, if the relationship comes to an end, one partner has no claim to a share of the other partner’s pension interest where he is a member of a retirement fund.

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Gareth Collier

Crue Invest (Pty) Ltd

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