Give as much attention to your marriage contract as you give to your wedding cake — if not more

2014-03-12 00:00

BEFORE you say “I do”, understand exactly what you are agreeing to.

Don’t ignore the legal implications as you plan your big day.

Give as much attention to your marriage contract as you give to your wedding cake and seating arrangements — if not more so.

If you are already married, understand what would happen to you financially if your partner died or you divorced.

I recently met a self-made woman who told me that she was married in community of property because she wanted to share her wealth with her husband.

Signing an ante-nuptial contract felt selfish and questioned her commitment to her marriage.

When you get married the last thing you want to be thinking about is divorce even if the figures are stacked against you (roughly half of South African marriages end in divorce).

However, divorce is not the only reason you need to review your marriage contract — debt is.

Depending on the type of marriage contract you enter, you may be liable for your spouse’s debt, and that is simply not good financial planning.

Even if your spouse died, the creditors would be able to claim your savings to settle the debts of your partner.

Types of marriage contracts:

• In community of property (COP):

Before you marry, it’s essential to know what kind of marital regimes exist in South Africa. You can marry either in community of property or out of community of property.

If you’re married in community of property, this means you and your spouse have a joint estate. Everything you have is owned by both of you equally. The same holds true if you divorce — you share the assets.

COP is the default contract under South African law unless you sign an ante­-nuptial agreement because it was seen to protect women who stayed at home to raise the children so that she had equal claim to the family’s finances.

However, as many women (and men) have discovered, you also share all liabilities, like debts or your partner’s insolvency.

Judy von Klemperer of Shepstone & Wylie Attorneys said marriage in community of property also limits your legal rights, as you cannot enter into certain forms of contract (including the purchase of a property) unless you have the consent of your spouse.

“Getting married in community is in some respects like turning back the clock so that you are younger than 18 and cannot enter into certain contracts without the consent of your ‘guardian’, being your spouse.”

According to Angelique Visser, head of products at FNB Trust Services and a member of the Fiduciary Institute of South Africa, the pitfalls of this regime are:

1) If one spouse dies, the bank accounts of the deceased and the surviving spouse will be “frozen” as all the assets will be dealt with by the executor;

2) All claims on the estate have to be settled before the surviving spouse can expect to be awarded any assets; and

3) Your spouse can bequeath their half-share of the family estate to a third party, and if you don’t get along with that third party (perhaps a child from a previous marriage, for example), there could be endless complications.

The positive is that as a partner you know that you are entitled to half of the family estate.

• Out of community of property:

You need to enter into this contract before the marriage takes place.

When are you married out of community of property, it means your estates are not considered jointly; they are separate according to the law.

This is commonly known as ANC (nothing to do with the party — it just stands for ante-nuptial contract)

Visser says the advantages of this regime are:

1) One spouse doesn’t need the consent of the other when entering into contracts;

2) If your spouse dies, the executor of the estate will deal only with the estate of the deceased, not a joint estate;

3) The remaining spouse’s bank accounts won’t be frozen upon the death of his or her partner;

4) Costs will be levied only on the estate of the deceased, not on the joint estate; and

5) You are not responsible for each other’s debt.

The downside is that if one spouse has earned a lower income or taken time off work to raise a family, in the case of a divorce they may not be entitled to any of the ex-spouses assets.

• Out of community of property with accrual:

If you don’t specifically exclude the accrual system in your ANC, this will automatically apply to your marriage.

Accrual means “increase”, so anything you both gain during the marriage will constitute an “accrual”.

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.

Visser says that a result of this regime is that effectively both spouses accumulate assets to the same value during the marriage as the spouse with a low-value estate will have a claim against the estate of the spouse with the larger estate.

In the event of death, the executor deals only with the estate of the deceased, and costs are only levied on the deceased’s assets.

This marriage contract tends to be the fairest as it protects a stay-at-home parent financially while protecting both spouses from each other’s debt.

• What about my common-law rights?

If you live with someone, without marrying them, do you have rights? The bottom line is, you don’t.

A “common-law” marriage is not recognised in South Africa, so even if you’ve been living with someone for 20 years you do not automatically have a claim on your partner’s assets.

So make sure you have savings, a pension plan and other financial security nets in place if you’re co-habiting but aren’t married.

If you are uncomfortable with the idea of marriage but would like some legal protection, you can enter a civil union.

This effectively gives each partner the same rights as an ante-nuptial contract without actually getting married. Civil unions can also be entered into by same-sex couples.

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