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Are you planning to get divorced, and uncertain how your assets and liabilities will be divided at time of divorce?
The division of assets will most likely be regulated by your Matrimonial Property Regime. Are you married In Community of Property or Out of Community of Property, with or without the Accrual System? Alternatively, Spouses may also enter into a settlement agreement, in which they can regulate the proprietary issues flowing from their divorce themselves. With a Settlement Agreement the parties can contract freely or apply the matrimonial property regime applicable to their marriage. This Settlement agreement will then be made an order of the Court when a decree of divorce is granted.
Let’s have a look at the different Matrimonial Property Regimes.
Marriage In Community of Property
The spouses have one joint estate only, and each party is entitled to an undivided half share in this estate. Upon divorce, the assets of the joint estate will be divided equally between the parties.
The exception hereto, will be if one of the spouses claim forfeiture, and such order is granted by the Court. An order for forfeiture must be specifically pleaded in the summons, and will be applicable when one of the spouses is/was acting in a negligent or reckless manner in respect of assets of the joint estate. The reckless spouse will then forfeit his or her right to share in the Joint Estate. Forfeiture may be either wholly or partially in favour of a party. The Court will consider the following reasons when considering a forfeiture order:
the duration of the marriage;
the circumstances leading up to the breakdown; and
if applicable, any substantial misconduct by one or both of the parties.
Out of Community of Property Without the Accrual
In terms of this regime, each spouse has a separate estate and assets and liabilities acquired before or during the marriage, will form part of their separate estates. This system allows each spouse absolute independence in respect of contractual capacity as well as protection against claims by the other spouse’s creditors.
At time of divorce, each spouse will retain the assets and liabilities from their own, separate estate, and will not have a claim against the estate of the other spouse.
Out of community of Property With the Accrual
The Accrual system structures the estate in such a way, to ensure that both spouses gain a portion thereof at date of divorce. The accrual system does not automatically apply to all out of community marriages, and an ANC must be drafted accordingly. Spouses will share the value of the estate, acquired during the course of their marriage based on a particular calculation when the marriage is terminated.
The term ‘accrual’ is used to denote the net increase in value of a spouse’s estate from date of marriage to date of divorce
An example hereof:
If spouse A had a net asset value of R10 000-00 at the commencement of the marriage (his "initial value") and a net asset value of R100 000-00 at the dissolution of the marriage (his "end value") then the accrual to his estate is R90 000-00. If the initial value of the other spouse B was R20 000-00 and her end value R200 000-00, it follows that the accrual to her estate is R180 000-00.
Net accrual is calculated by subtracting the "smaller" accrual from the "larger" accrual. In the above example: R180 000-00 - R90 000-00 = R90 000-00. In accordance with the Matrimonial Property Act, A (the spouse with the smaller accrual) acquires a claim against B (the spouse with the larger accrual) for one half of the net accrual (namely - R45 000-00).
The following assets will not be taken into consideration when calculating the accrual (are not included in the net value of the estate):
Any asset excluded from the accrual system under the ANC;
Any inheritance, legacy, trust or donation received by a spouse during the marriage from any third party;
Any donation between the spouses and third parties;
Any amount that accrued to a spouse by way of damages (e.g. defamation), other than damages for patrimonial loss or the proceeds of an insurance policy in respect of a dread disease.
Values considered for calculation of the Accrual
When parties enter into an ANC with application of the accrual system, they must make sure that the commencement values of their respective estates (i.e. how much their estates are worth at the time of marriage) are agreed upon.
Upon divorce, the net value of the estate (assets less liabilities, less excluded assets and/or commencement values) of each estate is determined separately. The larger estate must then transfer half of the difference to the smaller estate. The right to share in the accrual only applies upon dissolution of the marriage by divorce.
The commencement value subtracted from the current value of the estate must also be adjusted with the consumer price index (CPI) to make provision for any change in the value of money.
What if you got married Out of Community of Property before 1 November 1984?
As the accrual system only came into operation on 1 November 1984, marriages out of community of property concluded before then, were just regarded as such.
The Divorce Act however came to the aid of such spouses with a ‘redistribution of assets’ section prior to the enactment of the Matrimonial Property Act 88 of 1984. Although this section may only apply to a relatively small number of marriages, it is important to a particularly vulnerable class of spouses, mostly older women who are less likely to find employment upon divorce and who do not qualify for either child-support grants (as their children would be older) or state pensions.
This section will also apply to black people married out of community of property in terms of the old Black Administration Act 38 of 1927, prior to the commencement of the Marriage and Matrimonial Property Law Amendment Act 3 of 1988.
The Act does set out two requirements in order for the court to consider granting a redistribution order:
the spouse seeking the order must have contributed directly or indirectly to the maintenance or the increase of the other spouse’s estate during the marriage; and
the court must be satisfied that by reason of such a contribution, it would be equitable and just to make a redistribution order.
Entering into a Settlement Agreement
As stated above, should the parties decide to come to an alternative arrangement with regards to the division of their assets they can enter into a settlement agreement, and divide the assets as they see fit. This is most often the more amicable way of dealing with divorce disputes and can make the process much quicker and easier.
In the event of serious disputes, the parties (by agreement) or the court, can appoint a liquidator, to determine the value of the parties’ estates and to make the necessary distributions.
If the parties are unable to reach any type of agreement, the court will adjudicate on the issues at trial.