Matrimonial Property Regime

“THE GREATEST PITFALL OF YOUR MARRIAGE MIGHT NOT BE DEATH OR DIVORCE, BUT RATHER YOUR MARITAL REGIME”

1: IN COMMUNITY OF PROPERTY

In brief, in terms of this regime, the parties are treated as having one estate. This regime is automatically imposed if the parties do not enter into an Ante-Nuptial contract (ANC).

What is an Ante-Nuptial Contract? This is a special notarial contract that parties enter into before they marry.  If you seek to exclude the in community of property system, you must have an ante nuptial contract.

If married in community of property, all assets and debts are shared. This even extends to pre-marital debts by either of the parties. Each regime has different consequences on death and divorce. Furthermore, each regime has different advantages and disadvantages. 

WHAT HAPPENS UPON DIVORCE?

The court will be asked to make an order dividing the joint estate. The parties can mediate and decide the terms of how their property will be divided together. Alternatively, if you cannot face the individual and negotiate a win-win division then the division is determined by the court.  Theoretically, the split is 50/50.

ADVANTAGES?

• It is simple and automatic.
• Nice notion of two becoming one.

DISADVANTAGES?

• Assets are not protected from creditors. 
• For example, in the event of your husband or wife being in a business (a partnership, sole proprietorship or personal liability company). Subsequently the business becomes tight and it fails. In terms of this regime, there is nothing stopping the creditors from executing against assets which have always factually belonged to the wife because your estate is regarded as one.
• The debt follows you even after divorce, even if the marriage fails and the one party entered into debt prior to the divorce the creditor would still be entitled to execute against the innocent party even if they have been divorced for a long time (as long as the debt was incurred during the duration of the marriage).  

JUST A HEADS UP:

Always know that your partner cannot transfer, mortgage or pledge the property in the joint estate or enter into a suretyship agreement if you both do not sign the relevant agreement.

What is a suretyship agreement? This is an agreement where you agree to pay someone’s debt if their creditor is not able to obtain the debt from them. For instance, your friend is insolvent because he gambles all of his money away and there is not enough money in the estate to pay the creditor. In that instance, the creditor can ask you to pay the money.

IN THE ORDINARY COURSE OF BUSINESS TRADE OR PROFESSION

 In this instance spouses do not need consent if they perform these activities;

• Enter into a contract for the alienation or mortgaging of immovable property in the joint estate
• Bind him or herself as surety for another person’s debts. For instance, if Mr Louw is a farmer and he stands surety for a Liquor Store then that would not be in the ordinary course of his business as a farmer
• The point of spousal consent is that Spouses cannot deal with the joint estate in ways that would prejudice their spouses. Therefore, whether a decision is made in the ordinary course of business should be interpreted strictly.

2: OUT OF COMMUNITY OF PROPERTY WITHOUT ACCRUAL

This is a regime which keeps the parties estates completely separate.  It is not automatic, and should you wish to apply this regime you will have to enter into an Ante-Nuptial contract (ANC) which will have to be signed prior to your marriage and registered within three months from date of execution with the Deed Office.

It is important to note that if you forgot to enter into an Ante-Nuptial agreement or if you feel like you made the wrong decision, then you can make an application to change your marital regime. In terms of section 21 of the Matrimonial Property Act, spouses may apply to the court for permission to change their marital property regime. This application must be made jointly. The court will grant the application if it is satisfied that there are sound reasons for the proposed change, secondly if it is satisfied that the spouses have given sufficient notice of the proposed change to all their creditors, and lastly if it is satisfied that no other person will be prejudiced by the proposed change. The court can then make an order that the couple’s current marital property regime will no longer apply to their marriage and authorise them to enter into a notarial contract that regulates their new matrimonial property system.

ADVANTAGES:

• Your assets and debts belong to you exclusively and your marriage partner has no claim upon them nor can he or she bind you. 
• Creditors will not be entitled to execute against a debtor’s wife or husband. 
• It is attractive to parties marrying in their older years when they have children who they want to look after. This is often because part of the assets in the estate of the husband or wife were inherited from the children’s predeceased father / mother and they do not want that to become part of the joint estate and possibly shared with the children of the new spouse upon their death.

DISADVANTAGES:

• The negative side of this regime is that upon divorce or death there is too little protection for the spouse who has not worked and has not accrued assets into his/her name. 
• This regime is sometimes used by people who are a little suspicious of the person they are marrying and want to minimise a claim against their estate if things turn nasty. 

3: OUT OF COMMUNITY OF PROPERTY WITH THE ACCRUAL- BEST OF BOTH WORLDS

This is a regime which keeps the parties’ estates completely separate during the course of the marriage however the accrual kicks in on divorce or death.  Similar to out of community of property without the accrual, it is not automatic and should you wish to apply this regime you will have to enter into an Ante-Nuptial Agreement with accrual which will have to be signed prior to your marriage and registered within three months from date of execution with the Deed Office. This is the most popular regime. It is similar to the one immediately above but it includes the accrual system which remains dormant until death or divorce. 

Prior to either of those two events, things will operate exactly the same as number 2 above. How this works is that when you sign your ANC you declare what your estate is worth at that point. The value of your estate is the value of the assets less the value of the liabilities.

Say John’s estate is worth R10 000.00 and Jill’s estate is worth R20 000.00.  In the event of death or divorce a calculation takes place to determine what has happened to the two estates during the marriage.  In the same example John’s estate is now worth R20 000.00 and Jill has done very well and she is worth R150 000.  What can be seen is that between the two they have improved from a combined R30 000 to R170 000. The combined growth is R140 000.00 which is the accrual.  

In the example the overall growth was R140 000.00 and both parties should end up with R70 000.00 plus what they brought into the marriage: So in John’s case, R10 000.00 plus R70 000.00 makes a total of R80 000. 00 John has only R20 000.00 therefore Jill will have to pay over to John or his estate R60 000.00.

ADVANTAGES:

• What the system provides is that the regime recognises that both parties generally contribute to the growth of an estate and just because the assets are all in one person’s name this should not deprive the other of a fair claim. For instance, when John has been looking after the kids all these years while Jill has been engaged in business it recognizes that Jill would not have made that money if it was not for John who contributed in his own way to the household. The regime will only recognise the growth that took place during the marriage and not what was brought in.
• This system offers the best of both worlds in that you are protected from creditors and you still get to claim what is fair.  However, what does happen in practice is that people fight over the calculations which can be court cases in themselves.
• Remember the accrual only applies on death or divorce and only between the parties i.e. a creditor can’t try and attach your share of the accrual while you are still married.  For the above reasons this system is popular, especially amongst younger couples.

CONCLUSION

When you are in your honeymoon phase it is difficult to plan for the worst that might happen as it might seem like such a distant possibility. It is important to urge your partner to consider the different possibilities. It should be seen as a gesture of love now, because you seek to protect your partner for the worst that might happen in the future. Taking this decision is a good exercise for partners as it gears them for all of the difficult conversations that might have to be had during marriage.  Should you have any question further, please contact NGCOBO SN INC. We are here to guide you and make this an exciting journey!