By: Ryno Crous
One of the most important decisions a client can make, is their choice of marital regime when they decide to get married. This decision will effectively impact your current, as well as your future assets in several different ways. It is therefore imperative that every one of our clients consider and understand the impact of each of the available regimes.
The core marital regimes are: marriage in community of property, marriage out of community of property (without accrual) and marriage out of community of property (with accrual).
Although not an exhaustive list, the fundamental differences between the available matrimonial property regimes can be summarised as follows:
Marriage in community of property:
In the absence of an ante-nuptial contract, spouses are automatically married in community of property. This essentially means that the assets of both partners become one and is shared equally in a joint estate:
– Upon death or divorce, the joint estate is divided equally among the spouses.
– As both spouses have equal powers regarding the disposal of assets and contracting of debts within the joint estate, written consent from both parties is required for certain transactions (i.e. mortgaging of properties, entering into credit agreements etc). Financial independence within this regime is therefore limited.
– In community spouses can be jointly and severally liable for debts incurred by either spouse. This means that when one partner incurs debt, creditors can have a claim to both of your assets.
Out of community of property without the accrual system:
Within this regime, each spouse retains their respective estate throughout their marriage. This means that the assets acquired before or during the marriage remain the property of the individual partners:
– When either death or divorce occurs, each party to the marriage are entitled to the assets that they own in their individual capacities.
– When one spouse incurs debt, only their own assets are in danger of being seized by creditors.
– This marital regime is specifically suited to those that have accumulated substantial assets before/during marriage and wish to safeguard those assets.
Out of community of property with the accrual system:
In this case, each partner states the true value of their assets at inception of the marriage. Assets acquired during the marriage form part of the accrual to be divided equally upon death or divorce. Certain assets may be excluded from the accrual such as inheritances, donations and non-patrimonial damages. Wealth and assets built up during the marriage are shared equally when the marriage is dissolved.
– The assets as stated at inception of the marriage remain separate, and in each of the partners’ respective names.
– If one partner becomes indebted, no claim can be made against the estate of the other.
– In the event of death or divorce, any assets acquired during the course of the marriage are divided equally between spouses regardless of who obtained them.
Notes on Customary Marriages:
Customary marriages are understood as being entered into in accordance with the traditions and customs of indigenous African customary law. While civil marriages are monogamous (between two parties), customary marriages differ in that polygamy is permitted. Monogamous customary marriages are automatically considered to be in community of property.
Notes on Cohabitation:
There are some misconceptions in South Africa regarding couples who live together. The most common among these is that co-habiting couples residing together for a period of time, automatically fall within a particular marital regime and therefore enjoy the rights of legal spouses.
The definition of “spouse” for the purposes of income tax, estate duty and donations tax, includes a partner in a union which the Commissioner is satisfied is intended to be permanent. Simply put, this means that any cohabiting couples that wish to receive the same treatment of a legal spouse under these pieces of legislation, will have the burden of having to prove that their relationship is intended to be permanent.
Brief statement on the legislation that does not recognise cohabiting persons as spouses:
– Intestate Succession Act, 1987
This Act governs the distribution of a deceased person’s asset when they pass away without a valid will. Among others, spouses automatically inherit under this Act. Cohabiting couples are not regarded as spouses under this Act.
– Maintenance of Surviving Spouses Act, 1990 (Act No. 27 of 1990).
This Act gives a surviving spouse the right to claim maintenance from the deceased estate of the first-dying spouse if the surviving spouse cannot maintain him or herself independently. Cohabiting couples are not regarded as spouses under this Act.
In conclusion, cohabiting couples may, for the purposes of tax and estate duty, be regarded as spouses if they can satisfy the Commissioner of the permanency of their union. Whether couples will be successful in such an instance, will largely depend on the merits and factors of each individual case.
Therefore, if unmarried couples wish to benefit from one another in the event of death, they would do well to address the distribution of assets in a Will.