The legalities of how you marry matter
So you’re getting married this festive season, or sometime soon, but have not yet had the uncomfortable conversation about your marriage regime. Many couples avoid having real, honest and practical talks around their individual finances before the wedding, as they view such talks as mood killers due to their unromantic nature.
It matters to know your partner’s attitude and behaviour towards money and assets before you get married. And do not take their word for it. Open the books up, and see for yourself.
We live in a moderately traditional society, and one that generally still views an ante-nuptial agreement (ANC) negatively, and in-community of property (COP) positively. The argument is usually around trust and security.
Basically the proponents of the COP hold the view that if, “what’s mine is yours, and what’s yours is mine”, then it means we truly love and trust each other. By implication should “yours be yours and mine be mine”, then it means we don’t trust each other and we enter marriage with divorce already in mind. Couples opposed to ANC usually narrowly view this marriage regime from a divorce perspective.
But in the excitement of the wedding planning, many couples avoid looking at their finances and which regime would be suitable and safeguard the longevity of their marriage. And in our South African law, when you get married without any formal ANC agreement in place, then the state would automatically classify your marriage as COP. Of course you can change it later, but would have to follow a prescribed lengthy and tedious legal process at the High Court, and part ways with a substantial amount of money.
Let’s quickly explore these two marriage regimes.
Marriage In-Community of Property
The two estates of each partner are joined together into one estate of equal, undivided shares. In other words, the couple owns the joint estate together and it is only divisible equally upon termination of the marriage.
All assets and liabilities belonging to each of you before the marriage, as well as all assets and liabilities you accumulate during the marriage, form part of the joint estate. In community of property literally means ‘what’s yours is ours and what’s mine is also ours’. And that also goes for debts in that your debts become my debts, and my debts become yours.
Advantages
One advantage of this marital regime is that, in the absence of an ANC, there are no upfront legal costs that need to be incurred by the couple.
Disadvantages
A significant disadvantage of this regime is that you are responsible for all debt incurred by your spouse – even debt that was incurred before your marriage. This includes even maintenance that is payable by your spouse to children from a previous relationship. And if your partner is blacklisted by a credit bureau, then you also inherit the limitations of that blacklisting too.
If you are the financially stronger spouse going into such a marriage, your financial position could be significantly weakened by being in community of property. Another consideration is that, if your spouse becomes unable to pay their debts, or is in business that’s in debt, the estate can be declared insolvent and you too, can be held liable for their debt. Furthermore, should it happen that you divorce in an acrimonious manner, things can get very complicated. Given that at the time of divorce many couples experience a complete breakdown in communication, the chances of them being able to agree on the division of a joint estate are slim.
Ante-Nuptial Agreement
Signing an ANC agreement gives you the option to choose between an accrual or non-accrual system. In terms of the accrual system, each spouse retains control over their separate estate during the course of the marriage but can share equally in the growth of each other’s estate during the marriage. Simply put, the accrual system aims to ensure that both spouses in a marriage gain a fair share of the estate.
The non-accrual system means whatever assets and liabilities you individually had before the marriage, continue to form part of your separate estates. And any asset or liability you have during the marriage remains exclusively yours.
Advantages
In general, one spouse cannot be held liable for the debts of the other spouse. This means that if a husband is declared insolvent, his creditors will not be able to touch the estate of the solvent wife. In terms of the accrual, spouses are generally not liable for each other’s debts. All that they share is their net assets.
It is imprudent to enter a marriage without an honest conversation around the regime you’ll choose
Disadvantages
This type of marital property regime can have devastating financial consequences for a stayat-home-spouse. Should the marriage come to an end, a stay-athome-parent who was unable to grow their own estate in terms of asset value would have no legal claim to their spouse’s estate. However, the court can take into account the fact that they would have contributed to the marriage by raising the children, running the home and supporting their spouse’s career and determine accordingly.
Furthermore, depending on the complexity of the estates, calculating the accrual can be complicated. However, it remains the most equitable method of sharing the assets accumulated during the marriage.
It is imprudent to enter a marriage without an honest conversation around the regime you’ll choose. Actually, by not deliberately talking about it, you would have made the choice anyway.