Getting married is an exciting time, you are thinking about venues, wedding dresses and where you will live, but it’s important to spend some time considering your marriage contract, as this could seriously impact your finances, including those of your children, in the future.
In South Africa, your marriage is automatically assumed to be in community of property, unless you enter into an antenuptial contract. The choice of which marriage contract to enter into will govern how your assets and liabilities will be divided upon divorce or death. That’s why it is essential to have the services of a seasoned family law attorney who specialises in providing legal assistance to families.
In community of property
Marriage in community of property means there is one joint estate that belongs to the spouses in equal and undivided shares. The estate consists of assets and liabilities acquired prior to or during the marriage.
When marrying in community of property, you and your spouse share everything equally, including assets and debts. This means if your spouse incurs a large debt, you are jointly liable. If they fail to pay back the debt, the creditor can insist you pay back the debt.
You will need to get your spouse’s permission to take out credit or a home loan, to sell a large asset or to stand surety for a loan. This is to ensure you don’t become liable for your spouse’s debt without your knowledge.
Inheritances are included unless the will for which you are inheriting specifically excludes the inheritance. This means that your spouse will share the inheritance jointly with you should you get divorced.
Upon divorce, your assets are split equally, which means the house you live in would need to be sold, unless one spouse agrees to pay the other spouse half of the house value.
Married out of community of property
Marriages out of community of property say to the world that ‘yes I am married but I am a separate financial entity from my spouse.’ There are two main systems you can choose when getting married out of community of property, that is with or without the application of the accrual system.
Getting married out of community of property with the accrual system, you have the ability to structure it to the needs of your future financial goals as a couple. You can decide to exclude some wealth, such as specific assets named in the contract or inheritances by making your starting value at marriage that of the value of the inheritance in your name at the time.
The main concept is that upon death or divorce, the spouse who’s estate shows no accrual (growth), or smaller accrual will have a claim against the spouse who’s estate has grown more. This claim can only be equal to half of the difference between the two estates.
Choosing to conclude an ANC without accrual means that each spouse’s estate (assets and liabilities) prior to getting married belongs to each spouse exclusively. In the event of divorce or death, the phrase “what’s mine is mine and what’s yours is yours” is most applicable. Neither spouse will have a claim against the other for any assets.
This marital regime is particularly suited to spouses who intend to retain their respective careers and built up their separate wealth. It’s not recommended for spouses where one party intends to give up full-time work to become a homemaker as they would not be in a financial position to build up their own wealth during the marriage.
The benefit of being married out of community of property (with or without accrual) is that you can protect assets from creditors which is helpful if you are an entrepreneur.
Assets can be registered in the name of one of the parties to safeguard them, and debts that the other spouse incurs you will not be liable for.
You do not need your spouse’s permission to take out any credit, such as purchasing of a vehicle or house and you are not liable for your spouse’s debts, unless you have stood surety for them.
In order to be married out of community of property, an antenuptial contract needs to be drawn up by an attorney and lodged in the Deeds Office.
How to decide on which marriage contract to enter into?
Marriage is a partnership, you need to jointly decide how you wish to be married, which can have a lasting effect on your financial position in years to come. If you are happy with sharing all the assets and debts of your spouse before and during marriage, then choose to be married in community of property, however, if you wish to have financial independence, and not be liable for your spouse’s debts, then choose to be married out of community of property.