In South Africa the matrimonial regimes of married couples are primarily regulated by the Matrimonial Property Act (88 of 1984), which provides for 3 different matrimonial regimes, namely:
- In community of property;
- Out of community of property; and
- Out of community of property with the accrual system.
Each of the matrimonial regimes and their most important characteristics will be considered in greater detail below.
IN COMMUNITY OF PROPERTY
The first matrimonial regime to be considered is marriage in community of property.
The default position in our law is that a marriage is concluded in community of property. Where a husband and wife fail to conclude a valid ante-nuptial agreement prior to their wedding day, they will automatically be married in community of property.
What this matrimonial regime entails is that the separate estates of the husband and wife, which they built up prior to their marriage, now become one estate for all legal purposes. This could be illustrated as follows:
Prior to marriage
Husband’s estate =
R100 000 assets
R20 000 debt
Wife’s estate =
R50 000 assets
R15 000 debt
After marriage
Husband and Wife’s joint estate
R150 000 assets
R35 000 debt
After their marriage the husband and the wife have one combined estate in which each of them is a 50% owner. The property and assets that belonged to the husband prior to the marriage (except for certain instances such as property or assets that were inherited) is now 50% owned by the wife and vice versa.
Seeing that the husband and wife no longer have any separate estates, but one joint estate, the debt that each party had prior to the marriage also becomes the debt of the other party after the marriage. It is therefore very important for engaged couples to be absolutely open and honest about their financial situation prior to the wedding day, as it may have a severe impact on the other party.
The advantage of a marriage in community of property was traditionally seen as a protection of the wife’s interests, who stayed at home and raised children, while the husband was involved in commerce and increasingly gained income. In the event of the death of the husband or a divorce, the wife would be entitled to 50% of their joint estate. This would therefore avoid a situation where the wife, after all the years working in the family home and raising children, is left without money.
The disadvantages of a marriage in community of property are shortly the following:
because the husband and wife no longer have separate estates, both of them have to give their written consent for certain commercial transactions[1], amongst others:
- purchasing or selling an immovable property;
- signing surety;
- entering into a credit agreement as a “consumer” where the National Credit Act (2005) is applicable;
- alienating or pledging jewellery, coins, stamps, paintings or any other assets of the joint estate and held mainly as investments.
Some of these requirements may, however, not be applicable if one of the spouses enters into such transactions in the ordinary course of his/her trade, profession or business.[2]
A spouse may not institute legal proceedings against any other person or defend such proceedings without the consent of the other spouse, except for legal proceedings in respect of his/her separate property, for the recovery of damages (other than patrimonial loss) or in respect of a matter pertaining to his/her trade, profession or business.
Similarly, if an application for the sequestration of one spouse is brought, it is brought against both of them and the joint estate is sequestrated and both the husband and the wife will be declared insolvent.
Although a couple may be married in community of property, it is nevertheless possible for them to own property or assets that do not fall within their joint estate, known as their “separate property”, for instance any inheritance bequeathed to a spouse.
OUT OF COMMUNITY OF PROPERTY
The second matrimonial regime is a marriage out of community of property.
In order to be married out of community of property, the husband and the wife must conclude a valid ante-nuptial agreement prior to their wedding day.
The ante-nuptial agreement is signed (executed) before a Notary Public (who is an attorney) and is then registered at the relevant Deeds Office.
What this matrimonial regime entails is that the husband and wife each retain their separate estates after the conclusion of their marriage.
Whatever each of the parties owned prior to the marriage, remains his/her sole and exclusive property after the marriage and vice versa. The same applies to those assets and property acquired by each party during the existence of their marriage.
Upon the death of one of the spouses or a divorce, the other spouse will have no claim against any portion the estate of the other spouse (except to the extent that a claim for maintenance may still exist).
This matrimonial regime is most popular where a husband and wife already built up substantial estates prior to their marriage or where both spouses conduct their own businesses. Some of the advantages of this matrimonial regime are the following:
- Seeing that each spouse retains their own estates, the creditors of one spouse has no rights or claims against the property or estate of the other spouse’s estate.
- Each spouse is free to conduct business, enter into transactions and acquire assets and property without the cooperation or consent of the other spouse.
- Where one of the spouses is sequestrated, it has no effect on the other spouse, who continues to carry on independent of the insolvent spouse.
Even though the husband and wife have their own separate estates, each of them has a statutory obligation to contribute to the necessaries of their household pro rata to their financial means.[3] Spouses are also jointly and severally liable to third parties for any debts incurred by either of them for the necessaries of their joint household.4
OUT OF COMMUNITY WITH THE ACCRUAL SYSTEM
The third matrimonial regime is a marriage out of community of property with the accrual system.
As with a marriage out of community of property as discussed in paragraph 5 above, the parties must execute a proper ante-nuptial agreement prior to their wedding day.
Unless a couple specifically excludes the operation of the accrual system in their ante-nuptial agreement, the accrual system will automatically be applicable to their marriage out of community of property.
What the accrual system entails is that at the dissolution of a marriage by divorce or by the death of one or both of the spouses, the spouse whose estate shows no accrual or a smaller accrual than the estate of the other spouse, obtains a claim against the other spouse or his estate for an amount equal to 50% of the difference between the accrual of the respective estates of the spouses. The following illustration and example can be used to illustrate this principle:
Estate values at the date of marriage
Husband = R100 000
Wife = R50 000
Difference in value: R50 000
Estate values at the dissolution of marriage
Husband = R1 000 000
Wife = R200 000
Difference in growth: R750 000
In this example the husband’s estate grew R900 000 in value from the date of conclusion of the marriage to the date of dissolution of the marriage. The wife’s estate only grew by R150 000 for the same period.
The difference in the growth between the husband and wife’s estates is therefore R750 000.
Upon dissolution of the marriage the person whose estate had no or the least growth obtains a claim against the other spouse or his estate for 50% of the difference between the growth in their respective estates.
In our example, the wife’s estate had the least growth. She will therefore have a claim against the husband or his estate (in the event of his death) for R375 000, being 50% of the difference in growth between their respective estates.
The spouses must specify the commencement value of their respective estates in their ante-nuptial agreement in order to make it easier to accurately calculate their growth. In our example above the wife will state her commencement value as R50 000 and the husband as R100 000. If they both start with a value of R0.00, the value of everything each of them owns at the date that they enter into the marriage will immediately be taken into account as “growth” in their respective estates for determining accrual.
The parties to a marriage out of community of property with the accrual system can exclude some or all of their assets from the accrual system in their ante-nuptial agreement. The wife may for instance wish to exclude all of her jewellery and the family farm that she inherited from her father. The value of these assets will then not be taken into account when determining the value of the growth in her estate. This can be illustrated as follows:
- Let’s say both the husband and the wife decided to stipulate their starting values at R0.00.
- The jewellery is worth R50 000 and the family farm R1 000 000.
- If the jewellery and family farm is not expressly excluded from the accrual in the ante-nuptial agreement, then the growth in the wife’s estate immediately after the marriage will be R1 050 000.
During the existence of a marriage to which the accrual system applies, the right of a spouse to share in the accrual of the estate of the other spouse is not transferable or liable to attachment and also does not form part of the insolvent estate of a spouse.[4] This means that the claim for accrual is safe from the creditors of a spouse.
Any inheritance, legacy or donation received by a spouse during the existence of their marriage will not form part of the accrual, unless the spouses specifically agree thereto.[5]
The accrual of a deceased spouse’s estate is determined before any testamentary disposition, donation upon death or intestate succession takes place.[6] This section provides protection to the surviving spouse in that the value of the accrual of the deceased spouse’s estate must be determined before any inheritance is paid out to any person.
TAX CONSIDERATIONS
It is recommended that married couples consult professional financial planners to assist them with the structuring of their estates to avoid paying unnecessary taxes and estate duties upon the death of a spouse.
One important aspect that needs to be addressed already in the antenuptial agreement of the married couple is entitlement of the surviving spouse or children of the deceased to receive the amount due under a life insurance policy.
In terms of Section 3(3)(a)(i) of the Estate Duty Act (45 of 1955), the amount due under such policy that is recoverable by the surviving spouse or child of the deceased under a duly registered ante-nuptial or post nuptial contract, is not taken into account for purposes of calculating the value of the deceased estate for estate duty purposes.
The exclusion of the value of any life insurance policy payment to the surviving spouse or children of a deceased for purposes of calculating the value of a deceased estate, could have a massive impact on the amount of estate duty that will be payable upon the death of a deceased spouse. Therefore make sure that this aspect is properly regulated in the antenuptial agreement where the parties will be married out of community of property (with or without the accrual system).
At SST Incorporated we understand that engaged couples have better things to spend their time on than to figure out all the risks and implications of their proposed marriage. For any advice on your proposed marital regime and the legal / tax implications that it will hold, please feel free to contact one of our experienced lawyers.
Anica Theunissen
LLB; LLM (Estate Planning)
Director
Fiduciary and Commercial Department
Email: anica@sstlaw.co.za
Phone: 012 361 9823
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