If married within community of property, is my partner’s pension in danger because of my business debt? How can I legally avoid such danger before they resign?
If it is your partner’s intention to resign we would advise that they not draw the benefits in cash but rather preserve their pension benefit into a preservation fund. This way the pension benefit retains the benefit of protection against creditors offered under the Pension Funds Act.
This is governed by Section 37 of the Pension Funds Act.
In principle, the rule around protection from creditors is as follows:
Section 37a of the Act stipulates that a member’s benefits payable in terms of the rules of a fund cannot be reduced, transferred, ceded, pledged or hypothecated, subjected to any form of execution under a judgment or order of a court of law, or taken into account in the determination of a judgment debtor’s financial position in terms of Section 65 of the Magistrates’ Court Act, for an amount exceeding R3 000.
This means R3 000 is the maximum the Act allows to be deducted from a retirement fund in order to pay creditors. That is the rule regarding a debt judgment against your partner.
In the case of a debt judgment against you, because you are married in community of property, your creditors could try and get the judgment attached to your partner’s retirement fund. Given the maximum of R3 000, it is highly unlikely they would go through the fairly laborious process of claiming against a retirement fund.
In terms of Section 37b, pension assets do not form part of an insolvent estate. In other words, the full amount of your partner’s retirement fund is protected from creditors in the event that you go insolvent.
The provisions of the Act do, however, allow for certain other quite specific deductions which relate to amounts due per the Income Tax Act, amounts due and payable under the Divorce Act and the Maintenance Act, and damage claims by employers. All of these are not relevant to your question but worth mentioning.
In summary, your partner’s pension will remain protected from your creditors (as well as their own creditors) as long as it remains within a retirement structure governed by the Pensions Funds Act.
It is also worth mentioning that you consider housing your business in a separate legal entity to protect yourself from creditor claims. With most business ventures you are often required to sign personal surety, which you should try and avoid as far as possible.