One of life's greatest joys is falling in love with the man or woman of
your dreams, getting married and living happily ever after. However, while
planning for the impending nuptials, many couples fail to cater for the
dissolution of the marriage. As the old adage says, 'Hope for he best but plan
for the worst!’
The
dissolution of a marriage occurs either through divorce or death which
unfortunately means that at some point every marriage will come to an end. This
being the case it is of vital importance that this event be planned for even
before the vows are exchanged. The sad truth of the matter though, is that so
few couples take the time to do so. Indeed, as many come to learn, the time and
money spent in arranging your matrimonial regime and in doing some basic estate
planning before the wedding is a drop in the ocean in comparison to the
legal fees and frustration one incurs without having done so.
Furthermore, although it is
possible to approach a Court to seek an order that your marital regime be changed,
after your wedding day, it is an expensive and somewhat frustrating process and
may not always be possible. In comparison it is a relatively cheap and
simple exercise to obtain proper legal advice before you tie the knot. This
will ensure that you enter into the type of regime that will best cater
for your dreams and aspirations.
This being the case, it
must make some sort of sense to, at the very least, familiarise oneself with
the choices that are on the South African matrimonial menu and so what follows
is a very brief summary of that menu.
People getting married
in South
Africa,
whether it be a civil or customary union, have the following options: 'In
Community of Property', 'Out of Community of Property (with accrual)' and 'Out
of Community of Property (without accrual)'.
1. IN
COMMUNITY OF PROPERTY
This type of marriage is really the default option. If a couple get
married and there is no ante-nuptial agreement entered into between them, then
this type of marital regime subsists.
How
it works is that, everything the individual spouses owned before the marriage,
including his/her debts, gets combined and lumped together into what is known
as a joint estate. Going forward, everything they continue to earn, acquire or
purchase after their wedding date and up until date of dissolution will also
form part of this joint estate.
What
must also be borne in mind is that the partners become jointly and severally
liable for the debts of the other. Hence, if Mr X buys a motor vehicle by way
of an installment sales agreement and is unable to honour the debt, the finance
house may proceed against either or both parties. Furthermore, any judgment
entered into against Mr or Mrs X may be executed against the entire joint
estate. In short this means that family heirlooms and the money held in either
bank account etc... can all be seized by the sheriff and used to pay the
finance house for the car. Hence, if one spouse is reckless with their
financial affairs or merely gets into financial trouble, it can and will affect
the innocent party. Indeed, if one spouse becomes insolvent the couple can lose
everything and as a result, it is imperative that alternative arrangements be
made so as to protect your hard earned assets.
Although spouses are allowed to have a bank account in their own name,
the funds held in these accounts still form part of the joint estate.
With regards to entering
into contracts, caution must be exercised since any agreement that
one spouse enters into, binds the entire estate. This means that both spouses
can sell anything out of the joint estate or make any purchases on behalf of it
and it does not require much imagination to realise how disastrous the
consequences of this might prove to be. As an example, should John think
it a fabulous idea to sell the house or dip into Sally's bank account in order
to buy the latest video game console, strictly speaking he would be entitled to
do so! As a safeguard against this type of folly, however, the law stipulates
that in order to enter into any 'big' contracts the written permission of both
spouses is needed. This would include such things as, buying or selling a
house, putting a mortgage bond over your property, entering into credit
agreements, signing as surety, withdrawing money from your spouse’s bank
account, etc... This notwithstanding, a weather eye should be
kept with regards to all agreements entered into.
From the above, it is
clear that this type of marriage leaves both parties very much exposed to the
creditors and the folly of the other. Accordingly, it is probably not the ideal
system for any marriage where either or both parties have a business interest
at the time of the wedding or who have any desire to begin
an entrepreneurial venture sometime in the the future. It will also not be
ideal for any person who enters into the marriage with a decent estate in their
own name, while Mr or Miss Right, can't find two pennies to rub together.
However, should both parties be on an equal financial
footing and not have too many assets at the time of marriage and should they
not foresee exposing themselves to any major financial risks
throughout the subsistence of their partnership, it might prove
fitting. Even so, why risk it, when there are better options available?
Upon
dissolution of the marriage the entire estate (including the debts) is halved
and shared between the parties. The nature of death and divorce being what it
is, there is often nothing simple or expeditious about the process, yet we
will have to leave that the topic for another article at another time.
The author, and a great many other attorneys I might add, are of the
opinion that this is not the ideal matrimonial system to enter into. Although
it may have served our grandparents and parents well, the days of working one
job until retirement, paying off your house and saving quietly is for most
people, a vestige of the past. Consequently marriage in community of property
does not cater for the modern lifestyle that most couples pursue these days. If
parties do decide to employ this regime, the author suggests that sound and
competent legal advice be obtained on how best to protect your assets.
2. OUT
OF COMMUNITY OF PROPERTY INCLUDING THE ACCRUAL SYSTEM
Marriage out of community of property (with accrual) means that during
the marriage, each spouse controls their own assets and is responsible for
their own debts. They are also free to exclude any property owned by them prior
to entering into the marriage such as houses, cars, money etc... The implications
of which will be explained below.
These marriages are regulated by means of an agreement that is entered
into between the parties and is known as an ante-nuptial contract. It is an
incredibly important document and really sets out the parameters that the
couple wish to apply to their union and can include almost anything they want,
there are some exceptions but it is beyond the scope of this article to discuss
them. An important feature of the contract is that it is signed before a Notary
Public and registered in the deeds registry. Since the contract is not only
enforceable against the parties to the agreement but against third parties as
well, it must be registered in the deeds registry.
In practice, therefore what occurs is that the couple hand a list of
assets and their values to their attorney. The attorney will then list them on
the ante-nuptial contract and upon dissolution of the marriage the item or the
current value of the item will not form part of the accrual of the estate and will
be excluded. Hence, Granny's old Grandfather Clock will be safe from the
ravages of the maddening crowd. Furthermore, any other considerations that the
couple want included will be conveyed to the lawyer in question. They will then
convert those instructions into 'legalese', draw up the contract on the
couple's behalf, have it notarised and registered in the deeds registry.
On the dissolution of
the marriage the value of each of the partners' assets, obtained during the
course of the marriage, is calculated. All the assets and/or their current
value, exempted by way of the ante-nuptial contract, are excluded from this
sum. As such, if you had a house before the wedding day and excluded it in the
ante-nuptial contract, it remains yours and will not be included in the accrual
calculation.
The spouse whose estate has grown less than the
other’s estate during the course of the marriage will get half the difference
between the growths of the respective estates. However, this does not apply to
inheritances, donations, legacies and compensation for injury, unless of course
the ante-nuptial agreement stipulates that they will be included.
So
for example, if spouse X's estate has grown by one Million Rand and spouse Y's
estate has grown by R500 000.00. On dissolution, you will take R 500
000.00 from spouse X, divide it in half and give R 250 000.00 to spouse Y,
leaving both with R750, 000.00. In theory this may sound easy enough yet the
calculation of each of the respective spouse's accrual is often a cause of fierce
and aggressive debate at the end of a marriage.
For the sake of brevity I shall simply list the most important aspects
of the system below:
· Creditors
of one spouse cannot attach the other spouse’s separate estate.
· Spouses
are liable for their own debts.
· Spouses
are free to start a business, sign surety or borrow money without fear of risking
the estate. Spouses can lend money to each other from their respective estates.
· No
permission is needed to enter into contracts.
· Each
spouse is free to do as they want with their assets.
· There
is equal sharing of the growth of the spouses’ estates during the marriage, but
no sharing what the other spouse brought into the marriage; that is what he or
she owned at the time of the marriage.
· One
spouse can leave the marriage with a large amount of money and a large estate
while the other leaves with a smaller amount and smaller estate.
3. OUT OF COMMUNITY OF PROPERTY
EXCLUDING THE ACCRUAL SYSTEM
This is usually the
system that people who are already both very wealthy before they get married,
use to protect themselves and their assets. It too is regulated by way of
ante-nuptial contract and in this system; no assets are shared at all. Upon
dissolution of the marriage, each spouse walks out with what they have and has
no claim against the estate of their partner.
Advantages:
· Spouses
do not share their assets and on the dissolution of the estate, they get the
whole estate.
· They
are each responsible for their own debts and each partner’s creditors cannot
attach the other spouse’s estate.
Disadvantages:
· If
one spouse is unemployed and is financially dependent on their spouse, upon
dissolution of the marriage, they will not be entitled to any property from his
or her share, and may get only spousal maintenance.
It is the author's view
that these two models provide far greater security for the couple and caters
well for those who are involved in, or hope to start a business venture. It
protects the assets of the innocent spouse and should one partner get into
financial trouble, although it may put great financial stress on the marriage,
it will not leave the family destitute. Once again, this is not a one
size fits all business, so obtain competent legal advice.
That then, is a skin deep synopsis of the marital systems that we in South
Africa employ.
I trust that it may be a useful starting point for couples looking to get
married and that I have created enough awareness for them to ensure that they
seek competent legal advice so as to make the best choice for the type of
lifestyle, they wish to pursue. Once this dry and dusty business is concluded,
they can go about fitting dresses, choosing weddings cakes and drinking champagne.
Who knows but one day they raise a glass to an obscure attorney who took the
time to start them on their way to a legally secure marriage.
NOTICE – This blog is intended and presented as a general discussion on
the law for the general interest of the public. It should not in any way be
used as an alternative to obtaining competent legal advice, nor is it intended
to be presented as such. Should any person wish to discuss any legal issues
with the author hereof, they are welcome to contact him at ian@clarkeattorneys.co.za
