IN COMMUNITY OF PROPERTY
In South Africa you are automatically married in community of property when you get married without registering an antenuptial contract.
What does it mean to be married in community of property?
- You have one joint estate of which each spouse have a 50% undivided share: This means that all your assets, also those you accumulated before the marriage, forms part of your joint estate (There are some exceptions, for example when a will stipulates that an inheritance does not form part of the estate). Also both your liabilities, incurred prior to and during the marriage, are considered liabilities of the joint estate. So, if one spouse comes into the marriage with a lot of debt, his/her debt will then form part of the joint estate. The other spouse will then be jointly responsible for that debt. This include any debt, it can be maintenance payable to an ex-spouse from a previous marriage and even maintenance payable to extramarital children. Each spouse also has the capacity to bind the joint estate through their actions. For example, if a spouse has his/her own business and applies for an overdraft, and the business fails to pay the overdraft, a claim can be made against the joint estate. Your pension fund will also form part of the joint estate and your spouse will have a claim against your pension fund at the end of the marriage.
- For certain actions you will need permission from your spouse: As you do not have your own estate, you will need to get your spouse’s permission before entering into most transactions. In the case of purchasing or selling immovable property or entering into any credit agreement, you will have to obtain the written consent of your spouse.
- When one spouse becomes insolvent, both spouses become insolvent: This one speaks for itself. During insolvency the joint estate, including all assets specifically excluded from such an estate, are sequestrated as a community in property means that both persons are co-responsible for all liabilities.
- When one spouse dies, the entire joint estate must be administrated by the executor: The executor will by law administer the entire estate and not only one half of the deceased’s share. Therefore executor and Master’s fees are calculated on the gross value of the joint estate. Furthermore, all liabilities in the joint estate have to be discharged, unless the surviving spouse, if he or she is the only heir, is able to take them over.
OUT OF COMMUNITY OF PROPERTY
A marriage out of community of property is achieved by drawing up an antenuptial contract (ANC). The agreement must be entered into before marriage and allows the spouses to tailor-make their very own matrimonial property regime.
Out of community of property means that both spouses still have their own separate estates and that each spouse has the freedom to do with their estate as they please without the permission of the other spouse. Each spouse can buy or sell assets and will be responsible for their own debts.
When you negotiate the terms of your agreement with your spouse the agreement can either be with accrual or without accrual. Let us look at the difference and legal consequences of the two:
Out of community of property with accrual:
So what exactly is accrual? The accrual system will only be relevant when the relationship comes to an end – either by divorce or death. The accrual system has no consequences to the outside world: it is purely an internal arrangement between the spouses. On dissolution of the marriage, either by death or divorce, the value of the assets obtained during the marriage (the accrual) will be shared equally by the spouses.
The accrual is determined by calculating the difference in the net starting value and the net final value of the estate of each spouse with the exclusion of inheritances, legacies and donations. On dissolution of the marriage the value of the difference in the accrual of the two estates, taking inflation into account, is then divided equally. No creditor can make any demand on the accrual of the other spouse.
Accrual is something the legislature imposed in 1984 to protect the ‘homemaker’. Most mothers contributed to the household by staying at home to look after the children and to manage the household. That meant that they were not able to grow their own estates financially. If they were married out of community of property and the marriage ended, they were then left with nothing. Of course this was not fair as the husband would not have been able to grow his estate in the way he did if his spouse did not contribute by saving expenses and looking after their children.
You might think that this concept is outdated but in reality accrual is still very relevant today. In a lot of households one spouse might work in a lower paying job or position so that they are more available to look after the household or children. They might work with or for their spouses or they might stay at home to look after the children.
The accrual system thus offers a fair, modern, equitable system that is conducive to a harmonious marriage relationship. In short it means that each spouse has their own separate estates but at the end of the marriage, both spouses share in what was accumulated during the marriage.
Herewith an example of how accrual gets calculated:
Growth in A’s estate = R400
Growth in B’s estate = R800
You now subtract A’s growth (the party with the smaller growth) from B’s growth:
R800 – R400 = R400
As B accumulated R400 more than B during the marriage, he must now share that growth with A equally. A thus have an accrual claim of R200 from B.
It is very important to remember that accrual only comes into operation at the END of the marriage. You cannot claim accrual from your spouse during the marriage.
Out of community of property without accrual:
This system is probably the easiest system to understand. It literally means: “what’s mine is mine and what’s yours is yours.” You and your spouse do not share any assets or liabilities (expect if you buy something together in both your names) either before, during or after the marriage. This property system is the one I would usually recommend where both spouses are self-sufficient and neither stays at home to contribute to the household in a non-financial manner. Examples are couples who have already made their way life, who have older children from previous marriages or do not want to have any children together. To exclude accrual, your contract must implicitly state that you want to exclude accrual or it will apply automatically.