YOUR MATRIMONIAL REGIME AND YOUR FINANCES

Your marital status and Matrimonial regime impacts on almost every aspect of your estate and financial planning. Before we delve any deeper, let’s discuss the marital regimes in South Africa.

There are basically only two marital regimes in terms of South African Law:

  • In community of property; or
  • Out of community of property with application of the accrual system
  • Out of community of property without application of the accrual system

Our law values people’s ability to bequeath their assets in a Will as they see fit, but marital regimes could limit a testator’s ability to freely pass on wealth.

MARRIAGE IN COMMUNITY OF PROPERTY

 A marriage in community of property is undoubtedly the cheapest and popular form of all the marital regimes, although deeply flawed in my view.

In this form of marriage, the spouses’ estates (what they own/assets and any debt) are joined together and each has the right of disposal over the assets; they are equal managers of the joint estate. Each spouse has an undivided half share of the joint estate.

In the absence of an ante-nuptial contract (ANC), a marriage will automatically be regarded as in community of property.

Say spouse A and spouse B are married in community of property. Spouse A draw up a single Will (his own Will), and years later he passes away. In his Will, spouse A has not made any provisions for spouse B (he has left nothing for spouse B in his Will). Spouse B will be entitled to inherit 50% of the estate by virtue of being married in community of property. This, irrespective of the fact that no provision was made in the Will.

“Drafting a Will can be a complex affair and can be made even more complex by the presence or absence of a marriage, and by the choice of marital regime in the case of a marriage.”, says Louis van Vuren, CEO of the Fiduciary Institute of Southern Africa (FISA).

van Vuren adds that “The biggest limitation on an individual’s ability to deal with any asset in a Will is in a marriage in community of property. In such instances, both spouses own everything in equal shares.”

Spouses in an in community of property marriage, have joint powers of administration and may not nominate a third party as beneficiary on a policy without each other’s consent.

It gets tricky when the families are blended, I have seen this in my line of work quite frequently.

An image of a marriage in community of property.

MARRIAGE OUT OF COMMUNITY OF PROPERTY WITH THE ACCRUAL SYSTEM

Where marriages are entered into on or after 1 November 1984 and the spouses have entered into an ante-nuptial agreement without expressly excluding accrual, the spouses will be married out of community of property with accrual. In terms thereof, each spouse retains his pre-marital position but upon the dissolution of the marriage, each spouse will share in the growth of the marital union.

 

 

During the marriage, each spouse retains ownership and control of his own estate. Each spouse thus has full contractual capacity and can act independently of the other spouse during the existence of the marriage. However, the growth in a spouse’s estate, i.e. assets and income accumulated, during the marriage is shared equally between the spouses when the marriage ends, whether through death or divorce.

An image of a marriage out community of property WITH accrual.

The accrual is only calculated on the dissolution of the marriage by death or divorce.

MARRIAGE OUT OF COMMUNITY OF PROPERTY WITHOUT THE ACCRUAL SYSTEM

As mentioned above, the ante-nuptial agreement must specifically exclude the accrual system, failing which the accrual system will apply.
Where the accrual system does not apply, each spouse retains control over assets acquired prior to, during and at dissolution of the marriage. Each spouse has full contractual capacity independent of the other spouse. This can be shown as follows:

An image of a marriage out community of property WITHOUT accrual

CAN A MATRIMONIAL REGIME BE CHANGED?

The answer is yes. In terms of our law, a husband and wife may apply jointly to the High Court for leave to amend their matrimonial property regime if the following requirements are met:

  1. There must be sound reasons for the proposed change (my suggestion would be to seek legal advice in this regard);
  2. No other person will be prejudiced by the proposed change.
  3. The rights of creditors must be preserved in the proposed contract
  4. The application must contain sufficient information about the parties’ assets and liabilities to enable the court to ascertain whether or not there are sound reasons for the proposed change and whether or not any particular person will be prejudiced by the change

See more here

TO NOTE:

Your marital regime determines what is yours and what your competencies are when it comes to dealing with estate assets.

Someone who is married in community of property is only competent to deal with his/her half-share of the joint estate. Spouses in an in community of property marriage, may not validly nominate a third party as beneficiary on a policy without each other’s consent.

Should you be married out of community of property, but subject to the accrual principle, it’s necessary to understand who has the accrual claim and what the extent of the claim is.

The spouse with the greater accrual will have to take the accrual claim into account before one can determine what can be left to the beneficiaries, other than the surviving spouse.

The spouse on the receiving end of the accrual claim also needs an understanding of its impact on the surviving spouse where the estate is bequeathed to beneficiaries other than the surviving spouse. THIS IS VERY IMPORTANT! The surviving spouse could be compelled to sell assets to settle the claim if not dealt with effectively as part of a strategic estate plan.

When drafting a financial plan, present your ante-nuptial contract to you Financial Advisor, so that he may scrutinise same; so that he understands your marital regime.

Within the above broadly stated, your marital status/regime in effect sets the boundaries within which planning can take place. Before making the decision as a couple, thoroughly explore the dynamics of each marital regime; and opt for one that is suitable to you as a couple.

Wishing you everything of the best.

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Glossary of terms:

Will: A legal document in which a person makes sure that his/her belongings are distributed in accordance with his/her wishes after his/her death.

Testator/Testatrix: A person who makes a Will.

Bequest: A bequest is property given in a Will.

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Disclaimer: The article is provided for general information purposes only. Whilst care has been taken to ensure accuracy, the content provided is not intended to stand alone as financial advice. An expert should be consulted for advice based on the facts and circumstances of each transaction/case.

The contributor (Kim Nokwaza) shall not be liable for any loss or damages suffered by anyone who relies on or acts upon the information contained in this piece.

 

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2 Comments

  1. Absolutely loved how you highlighted what could be tricky processes to understand through inserting visual graphs lol for us creatives who don’t always get the intrinsic parts of law…thanks Kim

    1. Hi Ellen

      Thank you so much for your feedback, much appreciated.

      I’m pleased that my post has provided clarity. The graphics really simplify what tends to be tricky and sometimes overwhelming situation.

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