Which marriage contract should you choose?

Decisions made before the big day could end up working against the party they aim to protect.

AMANDA VISSER: Some people can take a year to plan their wedding day, but spare very little time for important decisions that will affect their lives when there’s a death or divorce. I am Amanda Visser and with me is Louis van Vuren, CEO of the Fiduciary Institute of Southern Africa. He shines some light on the different matrimonial property regimes and the potentially chaotic impact on your estate if you do not have a proper understanding of your chosen regime.

Louis, briefly explain the different matrimonial property regimes we have in South Africa.

LOUIS VAN VUREN: Well now, we have basically two main groups. The one is ‘in-community of property’ and the other is ‘out of community of property’. But marriages out of community of property can then also be divided into two different regimes: the one is with the accrual system and the other one is without the accrual system. In-community marriages, where people are married in community of property, is the default option in South Africa.

So if you get married without entering into an ante-nuptial contract, then you are automatically married in community of property.

That also applies to civil unions under the Civil Union Act of 2007, because a civil union solemnised under the Civil Union Act has the same legal consequences as a marriage under the Marriage Act of 1961.

…it’s also important that an ante-nuptial contract be registered in the deeds office before the marriage.

If you … did not enter into an ante-nuptial contract before getting married … you married in community of property, which means that the two spouses own everything that they owned before the marriage and everything that they will accumulate during the marriage, in joint equal and undivided shares. So there’s joint ownership in undivided shares.

If you married out of community of property without the accrual, then each spouse owns his or her own assets that were owned prior to the marriage, as well as everything that is accumulated during the marriage, and there is no claim of the one against the other on the dissolution of a marriage, either by death or by divorce. With the accrual system, which is the default option if you are married out of community of property, in other words, you entered into a contract after November 1, 1984, the accrual system applies, unless you explicitly excluded it in your ante-nuptial contract.

So in a marriage under the accrual system, each spouse still owns everything that was collected or accumulated during the marriage and prior to the marriage, but there is a claim upon the dissolution of the marriage in favour of the spouse who enjoyed the smaller accrual during the marriage.

[The smaller accrual is] in other words, the smaller increase in, let’s call it net assets or a net property during the subsistence of the marriage. That claim is then against the spouse/estate of a deceased spouse who enjoyed the greater accrual during the subsistence of the marriage. There is a technical way of calculating that – but in short, that is what it boils down to.

The difference between the two regimes

AMANDA VISSER: How do you decide on which regime to choose?

LOUIS VAN VUREN: Importantly, as I said, you have to enter into an ante-nuptial contract before getting married and this is what is called the ‘notarial contract’ and it must be registered in the deeds office before you get married, so before the date of marriage.

So how do you choose a regime? What makes you decide on one of these regimes?

In community of property: The truth is many people get married without even thinking about this and then they all [get] married in community of property. When one looks at the different options, in community of property is really only appropriate in circumstances where one of the spouses will not, during the subsistence of the marriage, accumulate substantial wealth and the other spouse will earn the most income and will be able to accumulate some wealth during the subsistence of marriage.

Then in community of [property] marriage is aimed at the protection of the spouse who will not be earning an income.

Traditionally that has always been the wife in such a marriage, where the wife is looking after the kids, raising the kids while the husband was earning the income for the family. That situation to my mind is the only one where it would be advisable to marry in community of property.

Out of community of property: The case for out of community of property is not only [regarding] property, it’s also out of community of profit and loss. That means if you married out of community of property, the other spouse is protected against the creditors of the spouse owing the money. So if I take myself as an example, when I got married many years ago, my wife [had only really] started working. I was finishing my studies, but I had study debt, so the marriage out of community of property protected her against my credit should I [have] ended up in a situation where I couldn’t pay it.

When it comes to the decision whether the accrual should be applicable, the important observation to my mind is whether the spouses will both enjoy the potential of any income and whether they both will have the potential of accumulating wealth during the marriage. If so, it would not be advisable to enter into a marriage under the accrual system.

The … accrual claim upon the dissolution of the marriage, can lead to unexpected consequences and unintended consequences because the claim could eventually go the wrong way.

Where there is potential for both spouses to earn substantial income during the marriage, it would be better to get married out of community of property without the accrual.

 

The pitfalls of making the wrong decision

AMANDA VISSER: Louis, can you explain to us the impact of making the wrong choice? You’ve really explored some of the pitfalls now, but are there any other pitfalls that people need to take into account when they make that choice?

LOUIS VAN VUREN: Yeah. I personally dealt with a couple 15 years ago or so: when they got married the husband already had substantial wealth. The wife was a survivor of an ‘in community of marriage’ [contract] where her late husband’s business went bankrupt and after the husband’s death she was left with nothing – and with two small kids.

So they got married and thought the accrual was a good idea because that would protect her from something similar happening again. But there was also a substantial age difference between them – the husband was 18 or 20 years older than the wife. What happened is that she studied further and entered into quite a lucrative career and accumulated substantial wealth, and at the time when I consulted with him, her [accrual] was substantially greater than her husband’s accrual and upon death, which was statistically likely to be his death, his estate would have a claim against her, which was never the intention.

So that is one of the impacts that’s difficult to foresee at the time of marriage, where you have to think carefully about which regime you’re going to choose.

And hence my statement that where both parties to the marriage … already have some wealth, you should be careful about entering into an accrual marriage for the reasons that the accrual claim could actually work against the party it was intended to protect.

Also, in what is called ‘reconstituted marriages’, it’s not a good idea to marry on the accrual or in community of property [regime] because if you have a situation of both parties having children from a previous marriage, obviously [an] in-community marriage could mean that the other spouse’s children could eventually be the beneficiaries of one spouse’s debt where that was maybe never the intention.

 

Is there any recourse?

AMANDA VISSER: If you’ve made the wrong choice, is there any way to change it?

LOUIS VAN VUREN: Yes, you can change it under Section 21 of the Matrimonial Property Act. The matrimonial property regime can be changed by way of a court order, but that means a court application with, obviously, the attendant costs due too, and for that you will need to go and see an attorney to go to court as an applicant.

You will also have to show to the court’s satisfaction that no other party will be prejudiced by this change in the matrimonial property regime and the obvious thing that springs to mind there is you will have to show that no creditor will be prejudiced by such a change.

AMANDA VISSER: Louis, if you’ve been married for 30 years and your spouse dies or there is a divorce, how do you find that contract again?

LOUIS VAN VUREN: Well, you should have kept it in a safe place, but as I said earlier, this is a notarial contract and it is registered in the deeds office and therefore you can get the copy. The deeds office offers a certified copy of the ante-nuptial contract, from the deeds office where it was registered. To the best of my knowledge, there are central computerised records that will be able to give you that copy as well.

 

What about cohabitation?

AMANDA VISSER: What happens if you have simply been living together for many years.

LOUIS VAN VUREN: Amanda, we don’t have a legal framework for that which automatically applies in our law if you’ve lived together for 30 years but never got married. Then the two partners in that relationship will have no claim against each other unless they entered into a contractual arrangement, which is what I would recommend to anybody who considers living together without getting married.

There is a slight anomaly in our law in that partners in a same-sex long-term relationship have been given the right to inherit in intestacy…in other words, where one [partner] dies without a valid will.

But that does not apply to marriages in opposite sex relationships, due to a slight anomaly in our law. People in same-sex relationships have successfully attacked the constitutionality of the Intestate Succession Act, but that has not been extended to long-term opposite sex relationships. Also, marriages under any religious regime, Muslim marriages, Hindu marriages etc have been ruled by the courts to create rights between the spouses in such a union and they can inherit if one dies without a will. The survivor can inherit from the deceased estate and they have also been given the right to claim under the Maintenance of Surviving Spouses Act.

AMANDA VISSER: Thank you. That was Louis van Vuren, CEO of the Fiduciary Institute of Southern Africa.

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As someone who did D Jing for weddings for 15 years, most people do it wrongly!! They throw big weddings and invite those “aunties” that have not seen them in 20 years and she brings R 20 and eats and drinks R 300. What a lovely gift. HERE’S THE QUALIFIED ANSWER. Have a small wedding with close friends and family THEN spend the money on the honeymoon!!!!!!!!!!!! Financial Fitness

Community of Property is archaic and dangerous. Parliament should pass legislation to make marriages out of community or property by default. If they’re worried about spouses being made destitute, then they can at least do away with community of profit and loss, and only require assets to be split on divorce (not creating a joint estate during marriage and making spouses liable for each other’s debts ).

There are several European countries where the default is something similar to our accrual system, i.e. there is no community of property during the marriage but upon dissolution by death or divorce everything is split in half. Of course, in those countries you can avoid this default by entering into an ante-nuptial contract to exclude it and have separate estates with no claims upon dissolution of the marriage. We already have some protection against leaving a surviving spouse destitute in the Maintenance of Surviving Spouses Act of 1990.

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