Knowing your Marital Property Regimes

In South Africa, various Marital Property Regimes exist, commonly summarised as a marriage in community of property and marriage out of community of property, which is subdivided into out of community of property with the application of the accrual system and, out of community of property without the application of the accrual system. 

In South Africa the automatic matrimonial property regime is the marriage in community of property, unless such is excluded by means of entering into an antenuptial contract, prior to the marriage being concluded.

It is unfortunately common that couples entering into a marriage do not consult an attorney or neglect carefully considering which regime is best suited for their specific needs. 

If you are married in community of property:

In terms of this marriage contract both parties are the owners of the joint estate.

From the start of the marriage all assets and liabilities are incorporated in a single, joint estate, with certain assets being excluded. Assets accumulated by one or both parties prior to the marriage also become part of the joint estate owned by both parties. In this case, assets that are excluded are, for example, those inherited by one of the parties on the distinct understanding that they will not form part of the joint estate.

Consequently all property in the joint estate will belong to the husband and wife as an equal, indivisible portion – and both of them will share in the profits or losses of the joint estate. 

The legal consequences of a marriage in community of property can be summarised as follows: 

• all property at date of marriage as well as all property acquired after date of marriage (including gifts, donations, inheritances and remuneration) fall into a communal joint estate.
• each spouse owns a fifty percent undivided share in the communal joint estate
• both spouses must consent, in wi to transactions such as disposal of assets of the communal joint estate, contracting of debts by the communal joint estate, performance of juristic acts, litigation against a third party.
• liquidation of the communal joint estate effectively means that both spouses are declared insolvent.
• upon death of either spouse the communal joint estate is administered leaving the other spouse unable to access the funds held in the communal joint estate. The administration process can take numerous months to complete.

A marriage out of community of property, without accrual:

This type of marriage becomes effective when the parties enter into an antenuptial contract.

This is a contract entered into by both parties and sets out the rules and conditions in respect of the division of assets, and which will apply during the marriage.

In the case of marriages out of community of property without accrual, the property owned by a person prior to the marriage, as well as all property accumulated during the marriage, belongs only to that person. The same rule applies to liabilities. Each party’s debt remains his or her responsibility. Consequently each party may deal arbitrarily with his or her estate in a will. 

Therefore this system is ideally suited to couples who have built up substantial estates in their own right (or own their own businesses) and cases where either of the spouses do not contribute to the future growth of the other spouse's income.

The legal consequences of a marriage out of community of property, without accrual can be summarised as follows: 

• all assets and liabilities of the spouses are generally kept separate from one another.
• spouses do not require each other’s consent when entering into certain transactions, as is the case in the marriage in community of property.
• The estate of the other spouse is protected from insolvency.
• Upon death of either spouse the deceased spouse’s estate is administered, without affecting the surviving spouse’s estate

A marriage out of community of property with accrual:

In terms of this marriage contract the difference between the net increases in the respective estates during the duration of the marriage is divided equally between the two parties when the marriage is terminated. 

The calculation of the accrual can briefly and generally be summarised as follows: It is important to determine the value of the estate at the time the marriage is contracted, for example R1m, and the value of the estate at termination of the marriage, for example R1.5m.

The amount by which the estate has increased (in this case R500 000) is then deemed the accrual.

The same calculation must be done for the other party to the marriage. 

Say the value of the accrual (as calculated above in the other party’s estate) is R300 000. The difference in accrual between the estates of the two parties is therefore R200 000 (R500 000 less R300 000).

The party whose estate accrued by the smaller amount will then have a claim against the other party’s estate for half of the difference in accrual: therefore R100 000.

The accrual will consequently be divided equally (R300 plus R100 000 = R400 000 for the one party and R500 000 less R100 000 = R400 000 for the other party in the marriage).

Certain assets are excluded from the accrual in terms of the Matrimonial Property Act. These include, for example, the following:

• An inheritance received during the duration of the marriage;
• Donations made between the parties during the duration of the marriage;
• Assets explicitly excluded in terms of the conditions of the marriage contract.

Although each marriage partner may bequeath his or her separate estate at his or her discretion, it should be borne in mind that in terms of the accrual system the other party may have a claim that will have to be finalised before the testamentary distribution can take place.

The legal consequences of a marriage out of community of property, with accrual can accordingly be summarised as follows: 

• all assets and liabilities of the spouses are generally kept separate from one another and only the accrual is shared.
• Spouses do not require each other’s consent when entering into certain transactions, as is the case in the marriage in community of property and of profit and loss.
• The estate of the other spouse is protected from insolvency.
• Upon death of either spouse the deceased spouse’s estate is administered, without affecting the surviving spouse’s estate. 

It is also important to note that the testator could be prevented from bequeathing his estate as he wishes if, after settlement of all claims, there are not sufficient assets or funds in his estate to carry out his wishes.

In Conclusion, while an Antenuptial Contract seems like a thorn in your side amidst all the wedding arrangements, it is a vital step in starting a marriage. It is wise to plan for the future and to make your attorney aware of what your goals are when entering into marriage where the well-being of our spouse may be affected as a result. We always pride ourselves in drafting contracts which are tailored to the exact needs of our clients.