MATRIMONIAL PROPERTY REGIMES IN SOUTH AFRICA
The matrimonial property regimes in South Africa are best explained as follows:
- in community of property
- out of community with accrual
- out of community without accrual
IN COMMUNITY OF PROPERTY
In South Africa, should a couple get married without signing an antenuptial contract beforehand, they are married in community of property. This is the default regime in South Africa. The effect of a marriage in community of property is that the couple’s assets and debts pre-marriage as well as during the marriage are all pooled into a single joint estate. Both spouses have equal management rights in respect of the joint estate; however, some transactions require mutual consent of both spouses.
The ADVANTAGES of a marriage in community of property
There is no need for a special contract before marriage, which is cost effective when planning for your marriage. Both spouses share equally in all assets and liabilities, which promotes a sense of partnership and joint management of the estate. The financially weaker spouse benefits from sharing in the assets of the stronger spouse.
The DISADVANTAGES of a marriage in community of property
Both spouses are jointly liable for each other’s debts, including debts incurred before and during the marriage. The result of which is that if one spouse becomes insolvent, both are jointly declared insolvent, risking the entire joint estate. Administration of the joint estate can be complicated, especially if the relationship deteriorates. This becomes more difficult if a marriage is strained as obtaining the joint consent required may be problematic.
Should the parties wish to change their matrimonial property regime from one in community of property to out of community of property with/without the accrual system, a court application is required before the contract can be signed in the presence of a notary and registered at the deeds office. This will result in legal costs for the couple after their marriage.
OUT OF COMMUNITY OF PROPERTY WITH ACCRUAL
Marriages out of community of property are regulated in terms of the Matrimonial Property Act 88 of 1984. The default out of community option is with the inclusion of the accrual system.
This means that each spouse manages their own estate during marriage. Upon the dissolution of the marriage (by either death or divorce), the increase in each estate’s value during marriage is shared. Included in the antenuptial contract is a commencement value for the couple’s respective estates. When the growth in the respective estates are considered upon dissolution of the marriage, a calculation of accrual includes adjusting commencement values with the Consumer Price Index (CPI).
The parties may also exclude inheritances, donations, and specified assets that are listed in the antenuptial contract from the accrual.
The ADVANTAGES of a marriage out of community of property with accrual
The spouses each manage their own respective estate independently during the marriage. Upon dissolution of the marriage, the spouses share equally in the growth (accrual) of their estates during the marriage, benefiting the economically weaker spouse. Assets acquired before marriage can be excluded from sharing if specified in the antenuptial contract. A marriage out of community of property with accrual effectively protects the spouses from each other’s debts, meaning that creditors cannot claim against the other spouse’s estate. A further benefit is that there is no complex joint administration during the marriage, as there is with a marriage in community of property, as each spouse continues to manage their own estate.
The DISADVANTAGES of a marriage out of community of property with accrual
For the marriage to be one out of community of property with the accrual the parties need to sign an antenuptial contract before they are married. Upon dissolution, the accrual calculation can be complex as it involves adjusting commencement values with the Consumer Price Index. The economically stronger spouse must share the growth in their estate made during the marriage. It is therefore essential that parties keep record of their financial arrangements to avoid further disputes.
The right to share in accrual only arises at the end of the marriage, it therefore, cannot be used as security for a loan during the marriage.
It is possible for parties change their matrimonial property regime to one out of community of property with the inclusion of the accrual system when they are already married, however this requires a court application and legal fees to give effect to this.
OUT OF COMMUNITY OF PROPERTY WITHOUT ACCRUAL
A marriage out of community of property without the accrual is similarly achieved by the parties signing an antenuptial contract before they are married. The result of a marriage out of community of property without the accrual is that each spouse keeps a separate estate and there is no sharing in the growth or accrual at dissolution. There are exceptions to not sharing in the growth or accrual at dissolution in the event of a court ordering that there is a redistribution of assets. Instances where a court may order redistribution of assets in divorce or deceased estate would be to protect the financially disadvantaged spouse.
The ADVANTAGES of a marriage out of community of property without accrual
Each spouse has complete financial independence and control over their own assets and liabilities. A marriage out of community of property without accrual protects a spouse from the creditors of their spouse. This means that one spouse’s insolvency does not affect the other spouse. There is no sharing of assets or liabilities, even at divorce (unless a court orders redistribution). A further benefit is that there is no complex joint administration during the marriage, as there is with a marriage in community of property, as each spouse continues to manage their own estate. This is matrimonial property regime is suitable for couples who wish to keep their finances entirely separate.
The DISADVANTAGES of a marriage out of community of property without accrual
A marriage out of community of property without the accrual requires an antenuptial contract be signed before marriage. The economically weaker spouse does not benefit from the other’s financial growth during the marriage. There is no automatic sharing of assets on dissolution of the marriage, which can disadvantage a spouse who contributed indirectly (e.g., through homemaking or raising the children).
It is possible for parties change their matrimonial property regime when they are already married to one out of community of property without the accrual system, however this requires a court application and legal fees to give effect to this.
When will you encounter matrimonial property regimes?
- When someone you know is getting married (preferably before, but it can be after)
- Estate planning
- When setting up retirement annuities / investments (tax considerations)
- Drawing up a will
- Buying immovable property
- Taking on a new business partner in a partnership
- Buying a business
- Entering into a contract with a third party
- Upon the death of a spouse
- Placing a spouse under curatorship (due to lack of mental capacity)
- Maintenance obligations (particularly children from a previous marriage)
How We Can Assist You
At Kaplan Blumberg, our family law team is set up to advise you well in advance to alleviate the stress that comes with planning a wedding and getting married. We support you every step of the way, including:
- Guiding you through the options available in terms of matrimonial property regimes,
- Explaining the process from consultation to signing and registration, and
- Ensuring the timeous registration and safe storage of your antenuptial contract.
Contact our team today for expert, personalised support. Let us help you tick one more item off your pre-wedding to-do list.