MARRIAGE IN COMMUNITY OF PROPERTY
If one marries in community of property then upon marriage one’s separate legal estate is merged with the estate of one’s spouse to form one joint communal joint estate.
The effect of this is that all of one’s pre-marriage assets and liabilities are shared with your spouse. Any post assets and liabilities are also shared and the criticism of the system is that it does not afford spouses the flexibility to protect assets from the claims of creditors.
If one of the spouse’s encounters financial difficulties then there is a real risk that the matrimonial assets (for instance one’s house) registered in the name of both parties will be attached by creditors to satisfy any claims for debt.
The “in community of property system” also has the added disadvantage that parties’ contractual abilities are limited. Because parties share the joint estate, it is not possible for one party to commit the joint estate to a liability without the consent of the other party. Spouses in this system need to obtain their spouse’s consent should they wish to acquire property or buy a car or obtain any form of finance or enter into any account at a clothing store would require one’s spouses consent.
MARRIAGE OUT OF COMMUNITY OF PROPERTY (ANTE NUPTIAL CONTRACT / ANC)
The other system available is the out of community of property system. In terms of this system, parties retain their separate estates after the marriage. They do not share any assets which they bring into the marriage and they do not share any liability for any debt owed before the marriage or incurred after the marriage. Within this system there are two options namely,
- The Accrual System
- Without the Accrual System
The ANC without the accrual system is in effect the old fashioned ANC system whereby parties retain separate legal estates and never shared any profit of the marriage. This system has advantage of protecting against creditors but is not necessarily fair to the spouse who makes a career or asset sacrifice since in such circumstances they would lose assets to which their spouses would have full entitlement upon dissolution of the marriage. The ANC with accrual evolved as a result of short comings in both the marriage in community of property system and the anc without the accrual system. In effect it takes aspects of both systems to provide a practical and fair system.
In terms of the accrual system parties retain separate legal estates and consequently retain their own assets and their own liability for debt. The only difference between this system and the ANC without the accrual system is that parties value their estates on commencement of the marriage and, upon dissolution of the marriage the profit of both spouses is shared. This permits spouses to protect pre-marriage assets. It also permits spouses to put assets in the name of the spouse who are least at risk, secure in the knowledge that the spouses will share in the growth in the marriage upon dissolution by death or divorce. The accrual is defined as the amount by which the estate increases and such it is not possible to have a negative accrual. Spouses are therefore never responsible for their spouse’s debt during the course of the marriage nor after the marriage.
Since the ANC is a contract between the parties the parties can include a number of clauses specific to their circumstances. There are certain clauses which are recommended and these include the exclusion of certain items. Exclusion is an item which is not included in the commencement or termination value of the spouse’s estate.
First example of an exclusion is an inheritance or donation. Insofar as the accrual system is intended to acknowledge that parties should be rewarded for the joint effort of the partners in the marriage, an inheritance is different in that is not the subject of joint effort but rather a family link between parents and children and brothers and sisters.
There is no reason that a spouse should share in any inheritance and consequently most Ante nuptial contracts would contain a standard exclusion to this effect. Similarly a personal or damages claim where by a person is compensated for actual physical pain suffered and physical injuries which limits one’s enjoyment of life are also excluded since this compensation is personal. It is possible to exclude a number of other items or concepts from an ante nuptial contract although it is recommended that exclusions be kept to a minimal since they can have the effect of undermining the effect of the accrual.
CALCULATION OF THE ACCRUAL
The accrual is calculated as follows:
Spouses each value their estates at the commencement of the marriage. On dissolution of the marriage the spouses estates are again valued and the spouse who has the greater accrual will pay have of the difference to the spouse who has the lesser accrual.
It is important to bear in mind that the accrual is to find the amount by which an estate increases and as such one cannot have a negative accrual.
WHEN DOES THE ACCRUAL OPERATE
It is important to bear in mind that the accrual only operates on dissolution of the marriage. During the course of the marriage the spouses’ estates will be in no way impacted upon by the accrual. This is necessary in order to protect spouses from the claims of creditors.
If one wishes to marry in community of property no formalities are necessary. If no wishes to marry out of community of property either with or without the accrual then it is necessary to conclude an ante nuptial contract. An ante nuptial contract needs to be prepared by an attorney and executed before a Notary Public before the parties are married.
It is recommended that spouses contact their attorney 2 to 3 months before the wedding to ensure that there is sufficient time to finalize the process. Once the document is executed at the Notaries office, the attorneys concerned will then ensure that the ante nuptial contract is registered at the local Deeds Office.
The cost of a standard ante nuptial contract should be in the region of R 2 500 – R 4 000.
Kuilman Mundell & Arlow’s fee at present is R2570.00 all inclusive made up as follows:
To the inclusive fee for consultation held and advice given with regard to matrimonial Property Law, drafting ante nuptial contract and attending to registration thereof,
Our Fee: R2000.00
Deeds Office registration fee R290.00