Marriage contracts may have unintended outcomes

2012-03-31 11:02

A woman called in recently to a local radio station for some advice on her marriage. Her husband had an affair resulting in a child with the mistress.

He had subsequently lost his job and his former mistress was claiming child maintenance from his wife!

What the wife obviously wanted to know was whether she had to support both her philandering and unemployed husband as well as his illegitimate child.

To her shock, and no doubt all the listeners to the radio station, she actually has to hand over a portion of her salary each month to her husband’s former mistress.

This must feel like the most unfair and unjust rule, but if you are married in community of property you are liable for all of your spouse’s financial obligations – including child maintenance.

Madelein Marais, a fiduciary services expert at Private Client Holdings, explains that when you get married and you do not sign an antenuptial agreement, then you are automatically married in community of property. This means that you do not own any of your assets alone – everything goes into the same money pot as your spouse’s and you share everything, both assets and debts, equally.

Says Marais: “Essentially, in this case her money is his money. This not only means that all debt is shared, but if one spouse dies the assets of both partners are frozen and

all claims on the estate have to be settled before the surviving spouse can expect to be awarded any assets.

“So if your spouse had significant debts on his or her death and you had significant savings, those savings will be used to settle all of those debts, decimating your savings.”

In terms of the scorned wife who called into the radio station, Marais says the only way for the woman to release herself from this liability is to divorce her husband.

On divorce, all their assets will be divided equally and she may have to pay her husband some of her assets. However, once they are divorced she is no longer liable for the ongoing maintenance payments.

Had the woman been married with an antenuptial agreement, such as out of community of property with accrual, she would not have been liable for the child’s maintenance payments. Marais says, however, that upon divorce or death the couple’s estate would be joined and then divided equally.

Under the accrual regime, if you divorce, you are each entitled to an equal share of what you have amassed together during the course of the marriage. However, whatever assets you had prior to the marriage remain separate. You are also not responsible for each other’s debts.

The courts would look at the value of the net assets of the couple at the time of divorce. For example, it would consider the value of the house, its outstanding mortgage and all other savings and debts.

If there were no other debts and the wife had accumulated savings of R500 000 while her husband had no savings, on divorce she would have to pay him R25 000.

While the wife may still find this intolerable, out of community of property with accrual is considered to be the fairest marriage regime as it protects a stay-at-home parent financially while protecting both spouses from each other’s debt.

The lesson to be learnt is that marriage is a contract and like any other contract it has financial consequences both in divorce and death.

And leaving your contract’s decision in the court’s hands will result in unintended consequences you may not have considered.

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