Getting married is a big step in a number of ways. The union of two lives doesn’t only end on the wedding day. Individuals become one not just emotionally and spiritually, but also financially. It’s important for couples to plan for the marriage thoroughly. This includes making arrangements for financial implications of marriage. In South Africa, if you get married without making arrangements for signing an antenuptial contract, you are automatically married in community of property.
A marriage in community of property is undeniably the most common form of all the matrimonial regimes. An antenuptial contract is not required here, so if you marry without an antenuptial contract, you will by defaulted to be married in community of property. In this system of marriage, the spouses’ estates will both share the assets and liabilities should one spouse default on debt, the debtor can act against both spouses. Each spouse has the right of disposal over the assets provided you obtain consent from the other spouse as they are equal concurrent managers of the joint estate.
Each has an undivided or indivisible half share of the joint or communal estate. Should you wish to marry Out of Community of Property with the accrual, your estate will remain separate during the marriage, only upon dissolution of marriage, while the assets accumulated during the marriage be shared. Should you choose to marry Out of Community of Property without accrual, your estates remain separate. Each spouses’ assets and liabilities remain solely their own.
Now let us have a look at a few things that will affect you or be affected whilst you are married in community of property:
All of the assets belonging to each spouse prior to getting married and all of the assets accumulated during the marriage will fall into the joint estate. There are a few exceptions, where certain assets may not be included in the joint estate:
Inheritance – inheritances and legacies accrued during marriage.
Donations – received from third parties and the spouse unless otherwise agreed.
Fideicommissum – owner of the property wishes to have it transferred from one person to another person at a later stage.
Title Deed – may state it is not subject to the parameters governing the joint estate.
Bequests – made in a will, subject to a marital exclusion clause.
Certain life insurance policies
Certain damages excluded from community and recoverable from other spouse.-Notwithstanding the fact that a spouse is married in community of property -
(a) any amount recovered by him or her by way of damages, other than damages for patrimonial loss, by reason of a delict committed against him or her, does not fall into the joint estate but becomes his or her separate property;
(b) he or she may recover from the other spouse damage in respect of bodily injuries suffered by him or her and attributable either wholly or in part to the fault of that spouse and these damages do not fall into the joint estate but become the separate property of the injured spouse.
All of the liabilities that are incurred by each spouse prior to the marriage and during the marriage will be considered as liabilities of the joint estate. Consequently, if one spouse comes into the marriage with a large amount of debt, his/her debt will then form part of the joint estate. The debt in question may include contractual debt, maintenance payable to an ex-spouse from a previous marriage as well as any maintenance payable to his/her extramarital children.
Each spouse has the capability of binding the joint estate through their actions. For example should a spouse enter into a contract without the consent of the other spouse - where consent is required, the law will favour the third party with whom the contract was made. Should a spouse, who has his/her own business applies for an overdraft, and the business fails to pay the overdraft, a claim can be made against the joint estate. Nonetheless, there are circumstances where a spouse must first obtain the consent of the other spouse before he/she can bind the communal estate.
Where a spouse binds his/her separate estate, such as a car or business in his/her name, through a debt, the creditor can lay claim against the private estate of that spouse. If that spouse’s private estate has insufficient assets to satisfy the creditor’s claim, only then can the creditor lay claim against the joint estate. If the third party was oblivious to the fact that consent was not given, the contract will be deemed valid. The innocent spouse is, however, protected in these situations, and when the marriage is terminated, that spouse will be compensated accordingly.
If the existing marriage in Community of Property, in principal there is one joint estate. Both spouses will receive the status of an insolvent and the joint estate is sequestrated. If the marriage is out of community of property (with/without accrual) the burden of proof lies with the solvent spouses to prove that all goods in the estate are his/hers and is to be excluded from the estate. One of the most devastating consequences of a marriage in community of property is that when one spouse becomes insolvent (cannot pay his/her debts), both spouses will be declared insolvent, because there is one joint estate that exists.
If there is a court order against either one of the spouses, the joint estate can be lost. All movable and immovable property of the debtor before and after sequestration, fall within his/her insolvent estate. Property acquired between sequestration and rehabilitation also form part of the insolvent estate and is available for the payment of his/her debts. The debtor’s necessities are excluded such as clothing, bedding, food, pension and compensation for personal injuries.
A sequestration order also has an effect on the debtor’s spouse. When either spouse is placed under sequestration, the separate assets of both spouses will vest in the Master of the High Court and later the trustee.
Managing the joint estate
Each spouse has equal management of the joint estate; however, the consent of the other spouse is needed for certain transactions. Although you have to acquire the consent of the other spouse to alienate joint assets of the estate, written consent is only required in certain instances.
There are instances where no consent from the other spouse is needed, that is where one spouse may act independently, to perform acts that are binding on the joint estate, will include:
entering into a contract in the ordinary course of his/her business;
making deposits at a banking institution;
selling certain movable assets, such as a car;
making donations to third parties that do not prejudice the other spouse;
entering into a transaction on the stock exchange;
performing transactions in the course of his/her business, trade or profession and
forming a company or trust.
The Matrimonial Property Act No 88 of 1984 categorises acts where a spouse needs the consent of the other spouse to enter into a valid transaction under the following types of consent:
In certain instances, only informal consent from the other spouse is required. In these instances, oral consent is sufficient. The following types of transactions will fall into this category:
Receiving money that is due to the other spouse, from sources such as:
✓dividends or interest on investments in their name;
✓income from his/her separate property, for example rent money earned from renting an immovable property;
✓an inheritance, donation or prize;
✓the proceeds of an insurance policy and
✓remuneration, bonuses, allowances, earnings, a pension, a gratitude for services rendered or by virtue of their profession, trade or business, or damages awarded for the loss of income from any of the aforementioned sources;
the alienation or burdening (i.e. selling and pledging) of common household furniture, such as washing machines, stoves, bicycles or pets; and
donating from the joint estate where the donation unreasonably prejudices the interests of the other spouse, such as donating furniture from the common household.
The following acts may be performed provided written consent has been obtained from the other spouse:
withdrawing money from any account held in the name of the other spouse;
alienating, ceding or burdening insurance policies, mortgage bonds, fixed deposits, shares, stocks or any of the other spouse’s investments at any financial institution; and
alienating or burdening assets of the joint estate, kept mainly for investment purposes, such as stamps, works of art, jewellery or coins.
Written consent with two witnesses
The following acts may be performed provided there is written consent from the other spouse and is signed by two witnesses:
entering a credit agreement in terms of the National Credit Act 34 of 2005;
entering into a contract to purchase immovable property; and
alienating immovable property, such as a house, townhouse or farm, belonging to the joint estate.
Prior written consent with two witnesses
In some instances, a spouse must give his/her consent prior to the transaction as it cannot be ratified later. The following acts may be performed provided there is prior written consent from the other spouse and is signed by two witnesses:
the actual alienation or burdening of immovable property belonging to the communal estate or the actual granting of the rights (selling or giving a third party a share in the property) over such immovable property; and
entering into a contract of surety, where one spouse binds the communal estate as a surety for debt of a third party.
When a spouse enters into a transaction requiring consent without the consent of the other spouse, our law favours the rights of the third party with whom the spouse contracted. If the third party doesn’t know or can’t reasonably have known that consent wasn’t given, then the transaction is valid.
The innocent spouse is, however, given some protection. When the communal estate is divided at the end of the marriage, the court will make an adjustment and the innocent spouse will be compensated accordingly.
The advantages of marriage in community of property
You don’t have to enter into a special contract before being able to get married.
If you are the financially weaker spouse, you get to share in the assets of your spouse.
In the end, the only advantage to couples marrying in community of property is that it encourages a relationship of equality for both legal and financial matters.
The disadvantages of marriage in community of property
If you are the economically stronger spouse, you are obliged to share your assets with your spouse.
You are jointly liable for each other’s debts.
The joint administration of the estate is somewhat complex.
When a marriage starts to fail, it can become difficult to obtain joint consent.
If a spouse is financially reckless, then a result will be that the other spouse becomes liable for those debts incurred.
If each spouse runs their own individual business, then being married in community of property will render their businesses vulnerable to creditors who will make claims against both spouses. Very little can be done in such instances to protect the other spouse from this vulnerability.
The reputation of both partners becomes endangered as a result of liabilities from before and during the marriage that were added to the joint estate.
Suing for damages
Spouses married in community of property cannot sue each other for damages. It would be absolutely senseless as money taken from the joint estate to pay the one spouse will simply fall back into the joint estate. However, there is an exemption to this rule.
A spouse can sue the other for non-financial loss arising out of bodily injuries caused by the other spouse. For example, if the wife is a passenger in a car driven by her husband, and because of his negligent driving they are involved in a car accident, she can sue him for her pain and suffering because it is a non-financial loss.
She can’t sue him for her medical expenses, since they are considered a financial loss. Damages that she recovers in respect of the non-financial loss which is damages paid to her for pain and suffering, will fall into her own estate, outside of the joint estate.
Change of matrimonial property system
Couples can often rush into marriage, and before they realise it, become bound by South Africa’s default marital regime which is that of ‘In Community of Property. However, couples can choose to amend their marital regime to one of out of Community of Property – with or without the accrual system. A husband and wife, whether married before or after the commencement of the Matrimonial Property Act, may jointly apply to a court for leave to change the matrimonial property system, including the marital power, which applies to their marriage.
Section 21 (1) of the Act provides that a married couple may jointly apply to court in order to amend the existing matrimonial property regime, if satisfied that:
there are sound reasons for the proposed change;
sufficient notice of the proposed change has been given to all the creditors of the spouses;
Notice of the intention to amend must be given to the Registrar of Deeds, it must be published in the Government Gazette and two local newspapers at least two weeks prior to the date on which the application will be heard, and must be given by certified post to all known creditors; and
Confirmation that no other person will be prejudiced by the proposed change, order that such matrimonial property system shall no longer apply to their marriage and authorize them to enter into a notarial contract by which their future matrimonial property system is regulated on such conditions as the court may think fit.
It is essential to know and understand the specific liabilities and the requirements when exercising your rights in terms of the joint estate. Knowledge of this type of marital regime, being married in community of property would provide a better basis from which to decide on the best marital regime to protect the assets and interests of the spouses or life partners and whether to enter into an ANC.