THE ‘HITCH’ BEFORE YOU GET HITCHED: DECIDING YOUR MATRIMONIAL REGIME

Matrimonial Property Regimes

South Africa has three different types of matrimonial property regimes,[1] namely:

1. Marriage in community of property;

2. Marriage out of community of property (without application of the accrual system); and

3. Marriage out of community of property (with application of the accrual system).

Marriage in community of property:

Marriage in community of property still seems to be the most popular form of all matrimonial regimes, despite the clear disadvantages of this regime.

If you get married in community of property, your and your spouse’s estates (your assets and debts / liabilities) are massed together to form one joint estate.

Put differently, you both jointly own all assets in the marriage and are jointly liable for all debts in the marriage, regardless of ‘in whose name’ the asset or debt may be listed or registered.

All the assets and liabilities that you and your spouse acquire before marriage (come into the marriage with), as well as the assets and liabilities that you accumulate during the marriage will form part of the joint estate.

If the marriage is dissolved by death or divorce, the nett value of the joint estate will be divided equally between you and your spouse.

Consequently, if your spouse enters into the marriage with a lot of debt, both of you will be liable for the payment of that debt and / or liability.

This regime applies automatically, unless the couple conclude and register an antenuptial contract prior to the marriage.

Marriage in community of property can therefore be described as the “default” marriage system in South African law.

Further considerations applicable to a marriage in community of property, include:

• Neither spouse has full contractual capacity.  If you or your spouse want to enter into certain transactions, the express prior consent of the other is required.  In some cases, prior written consent is required.[2]

• If one spouse becomes insolvent, the other spouse is automatically considered insolvent, and the joint estate is subject to the insolvency.

• If one spouse runs their own business (as a sole proprietor, member of an incorporated business, or in partnership), the other spouse is also vulnerable to the creditors of the business.

• If you inherit something or receive a donation from a third party, the inheritance or donation will form part of the joint estate unless the testator or donator specifically declared that it will not form part of the joint estate by means of his or her Will or donation agreement.

Out of community of property (with the exclusion of the accrual system):

This is also known as marriage out of community of profit and loss.

This regime is essentially the opposite of marriage in community of property, as each spouse retains his or her own assets accumulated before and during the marriage, and debts / liabilities incurred before and during the marriage.

In simple terms: “what’s yours is yours, what’s mine is mine”. Both spouses retain control of their own estates.

You and your spouse will be required to sign what is known as an “antenuptial contract” before date of marriage.

The antenuptial contract (also known as an “ANC” or prenuptial agreement) is a contract between two parties who are preparing to be married, which regulates the proprietary terms of the marriage.

The purpose of this contract is to alter or amend the automatic consequences of the ‘default’ matrimonial regime (marriage in community of property).

The antenuptial contract must be signed by the parties in the presence of a notary public before the date of marriage and is then lodged at the Deeds Office to be registered (so that it can be of force and effect).

Consequences of this regime, include:

• Both spouses have full contractual capacity. This means that both you and your spouse can enter into contracts and enter into business ventures without the consent of the other.

• If one spouse becomes insolvent, the estate of the other cannot be (automatically) sequestrated.

• A spouse who, for example, stays home to care for the children and does not earn an income (and cannot contribute to the growth of his or her own estate) will be financially disadvantaged if the marriage dissolves (on death or divorce).

Marriage out of community of property (with the inclusion of the accrual system):

After 1984, parties who enter into a marriage out of community of property are automatically subject to the accrual system, unless it is expressly excluded in the antenuptial contract.

Where the accrual system applies, and on dissolution of the marriage (either by death or divorce), spouses will be entitled to a share in the growth of their respective estates.

The term accrual is used to define the nett increase in the value of a spouse’s estate, which is calculated from date of marriage to date of dissolution of marriage.

In other words: what belongs to each spouse before the marriage and during the marriage remains each spouse’s own, but  – on death or divorce – the assets accrued (the growth of the estate) during the marriage is shared between the spouses.

There are certain assets that are not taken into account when determining the accrual:

• Any asset specifically excluded from the accrual system in the antenuptial contract, for example, specified jewellery or immovable property;

• Any inheritance, legacy, trust or donation received by a spouse during the marriage from a third party (unless the spouses have agreed otherwise in the antenuptial contract), for example, if your grandmother bequeaths a house to you in her Will;

• Any donation between the spouses; and

• Any amount awarded to a spouse by means of a damages claim (for example, for defamation), other than damages for patrimonial loss.

Before entering into this matrimonial regime, both spouses must specify in the antenuptial contract the commencement values of their respective estates (the value of their respective estates at the start of the marriage).

Parties can also choose to define their commencement value as “nil”.[3]

Upon the dissolution of the marriage, the nett value of each estate is determined separately.  

The spouse whose estate shows the smaller growth or accrual will be entitled to the value of half of the difference between the values of the respective estates.

For example:

Before the marriage, spouse A’s estate has a commencement value of R20,000.00. Spouse B’s estate has a commencement value of R10,000.00.

At the dissolution of marriage, spouse A’s estate has accrued (grown) by R100,000.00 whilst spouse B’s estate has only grown by R50,000.00.

The commencement value of R20,000.00 for spouse A’s estate has to be subtracted from the R100,000.00, which means the accrual for spouse A’s estate is R80,000.00.

The commencement value of R10,000.00 for spouse B’s estate has to be subtracted from R50,000.00, which means the accrual for spouse B’s estate is R40,000.00.

The amount of R80,000.00 is added to R40,000.00 to determine the combined accrual of the estates, which is R120,000.00.

This sum is then divided by 2, which means that each spouse gets R60,000.00.  (Or, put differently, spouse B will get R20,000.00 from the estate of spouse A.)

Further considerations of the effect of this regime, include:

• This system is modern and equitable (fair).

• The spouses can ultimately share in the assets accumulated during marriage, but are protected from each other’s debts during the marriage.

• The financially weaker spouse can benefit from the marriage, such as the spouse that stays home by agreement, to raise the couple’s children.

• If you are wealthy before marriage, or have a lot of assets before marriage, these assets remain yours (as long as they are excluded in the antenuptial contract or included in the commencement value of your estate) and can be protected.

• Each spouse is free to manage their own estates.

• Either spouse can however apply to Court for an immediate division of the accrual if he or she feels that the other may prejudice his or her right to the accrual, for example, by entering into an unwise transaction, placing the other spouse’s accrual claim at risk.

• Neither spouse shares in the creditworthiness of the other.

Conclusion:

Getting married is a joyous milestone in your life. It is, however, important to carefully decide which type of matrimonial regime you want to enter into, as the decision has far-reaching implications.

Generally, marriage in community of property is not recommended, but may be the best option in a particular set of circumstances.

Whilst marriage out of community of property with the accrual system is a modern and fair matrimonial regime, a straightforward marriage out of community of property may be more appropriate in certain circumstances.

It is best to obtain legal advice, to discuss your particular facts and circumstances, prior to making your election on which regime to bind yourselves to.

This article is for general information purposes and should not be used or relied on as legal or other professional advice. We do not accept liability for any errors or omissions nor for any loss or damage arising from reliance upon any information contained in this article. Please contact our offices on 031 202 3100 / ca****@***************co.za for specific and detailed advice on this topic.

Written by Candice Sage

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[1] Many couples who do not have substantial assets may choose to specify their commencement value as “nil” (thus choose their starting value as nothing) so that the growth of the value of their estates during the marriage is divided equally.

[2] This is regulated by section 15 of the Matrimonial Property Act. One example is that a spouse cannot, without the prior written consent of the other, enter into a credit agreement as defined in the National Credit Act, 2005. Another is that a spouse cannot alienate (sell) immovable property forming part of the joint estate without the consent of the other spouse.

[3] As provided for in the Matrimonial Property Act, 88 of 1984

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