Explained: In or out of community of property? South Africa’s marriage systems.
With the latest amendments to lockdown regulations, couples are allowed to marry with a wedding ceremony and reception once again, provided that fewer than 48 guests attend and that everyone present wears a mask (which makes for interesting photos!).
One thing that has not changed is deciding on a marital property regime before you say ‘I do’.
Now, ‘regime’ sounds serious. But so is the promise you’re making to your spouse-to-be.
An antenuptial contract, often referred to as an ANC (or a ‘prenup’ overseas) takes care of the financial ‘terms and conditions’ of a marriage, and makes sure that the financial side of family life runs as smoothly as possible.
With the help of an experienced attorney, creating an antenuptial contract that suits you and your spouse is simple.
First, you need to decide whether you want to be married in community of property or out of community of property.
If you choose marriage in community of property, you need go no further. This is the default option, and any couple who does not sign an antenuptial contract is considered to be married under this system.
While it is initially easier administration-wise, there are a few pitfalls. You and your partner are considered to become one financial entity, which has the following implications:
- The assets as well as the debts of both partners are joined into a ‘joint estate’. This means that one spouse might end up in a worse position financially than they were before the marriage, if the other has debt outweighing their assets;
- Everything that is earned, bought, inherited, or acquired in any other way during the marriage falls into the joint estate. The only exception is when a spouse inherits from a third party whose will stipulates that the inheritance may not form part of a joint estate. This means that even if one spouse earns significantly more (and even if they are the sole earner), the other is entitled to half of the estate that grows from that income;
- The contents of each partner’s bank account and any other assets that might only be registered in one of the partners’ names is part of the joint estate;
- If one spouse creates debt that they cannot repay, it is the joint estate that is sued or becomes insolvent; no assets (whether or not they were acquired before the marriage) are protected from creditors;
- When the marriage ends, whether by death or divorce, the estate is divided equally, irrespective of the value of the assets that each spouse contributed to the joint estate; this may leave one spouse with an unfair advantage or disadvantage.
There are also many frustrating administration requirements that come with marriage in community of property. For example, if you wish to take out a loan for whatever reason, you need your spouse to sign the document, as well.
More modern, and more popular, is marriage out of community of property.
Marriage out of community of property allows each partner to remain, be treated, and act as a financial entity independent and distinct from the other, which has the following implications:
- Each spouse keeps their own debts and assets, although one may use their assets to help the other pay off their debts;
- Everything earned, bought, inherited, or acquired in any other way during the marriage remains the property of the partner who acquired it;
- The same applies to money in either spouse’s bank account;
- The spouses are not liable for each other’s debts, which means that one spouse could be sued or declared insolvent, without affecting the other’s financial status or placing the other’s assets at risk of attachment by creditors;
- When the marriage ends, each spouse simply retains their own estates; they do not have any financial claim against each other and are not responsible for any debt incurred by the other.
Marriage out of community of property with accrual is similar to the above, except that the difference between the growth that each spouse’s estate accrues during the marriage is shared equally when the marriage ends; the spouse with the greater growth must pay the other half of the difference.
Every couple has different needs, which makes speaking to someone you trust about the best starting point for your marriage important.
We pride ourselves on adding a personal touch to antenuptial contracts, so that you can take care of legal matters without losing the romance and excitement of planning your big day.
To speak to one of our attorneys (either virtually or in person), give us a call on 011 347 0300 or send an email to email@example.com to make an appointment.
We look forward to assisting you!