MONEY AND MARRIAGE: THE 3 REGIMES

Marriage is a beautiful celebration of love and commitment, but it also brings with it a fair amount of legal and financial implications and administration. One of the most important marital decisions you will need to make is choosing the type of matrimonial regime into which you and your spouse will enter. There are 3 types of regimes laid out in the Matrimonial Property Act 88 of 1984:

• In community of property
• Out of community of property without accrual
• Out of community of property with accrual

Each of these offers a unique set of benefits and regulations regarding the estates of you and your spouse. Marital regimes can be an uncomfortable topic, as they are largely put in place to protect both parties in the case of divorce. However, it is essential for you and your spouse to do your research and understand the conditions of each arrangement.

Here we break down the rules of each regime so that you can find your perfect match:

IN COMMUNITY OF PROPERTY

Spouses who are married in community of property enter into a joint estate and split all liabilities and assets equally. This means that whatever you bring into the marriage becomes shared, and both parties are liable for any debts in the estate, regardless of who incurred the debts.

This can be beneficial for the spouse with a smaller estate. However, this is an incredibly risky arrangement if either you or your spouse are in debt, as creditor providers are legally allowed to seize assets in the joint estate if the debtor defaults on their payments. Furthermore, spouses married in community of property will need their partner’s consent for certain financial transactions, such as signing surety and taking out credit. If you and your spouse divorce, each will receive 50% of the estate, regardless of who may have owned the assets prior to marriage.

This regime is the default arrangement in South Africa and does not require a prenuptial (or antenuptial) agreement. Any couple who is married without a prenuptial agreement will be automatically entered into community of property. It is absolutely crucial that you are completely honest with your partner regarding any debts you may have, as their property could be seized as collateral if you are unable to repay your creditors.

OUT OF COMMUNITY OF PROPERTY WITHOUT ACCRUAL

Spouses who marry out of community of property retain separate ownership of their assets and liabilities throughout the marriage and after divorce. In order to be married in this arrangement, you will need a prenuptial agreement that is signed before an attorney and register at the Deeds Office.

This regime provides protection for each spouse’s estate, as each spouse’s respective creditors will not gain legal access to the other’s estate. Furthermore, spouses are free to enter into financial agreements and conduct transactions without their spouse’s consent. In the case of divorce, parties will be unable to claim any portion of the other’s estate.

OUT OF COMMUNITY OF PROPERTY WITH ACCRUAL

This final regime is something of a combination of the above two arrangements. As with marriage out of community of property without accrual, spouses’ individual estates will remain their own throughout the marriage, and you and your spouse will need to enter into a prenuptial agreement to be married in this way. ‘Accrual’ refers to the growth of the spouses’ estates during the marriage.

In the case of divorce or death, the accrual system offers protection for the spouse with a smaller estate through the following protocols:

• Spouses must specify the commencement value of their estates in the prenuptial agreement
• If a spouse dies or there is a divorce, the growth of each spouse’s estate must be calculated (i.e. the difference between the estate’s values at the time of marriage and divorce/death)
• The spouse whose estate has had the least growth over the marriage obtains a claim against the other spouse for an amount equal to half of the difference in accrual value. I.e. If a couple is married and the husband’s estate grows R200 000 in value while the wife’s grows by R100 000, the wife is entitled to a claim of 50% of R100 000 (R200 000 – R100 000).

Marriage out of community of property with accrual allows spouses to maintain financial independence and control of their respective estates, while providing security should the marriage dissolve.

As you will see, matrimonial regimes have a huge impact on the finances and security of each spouse. It is, therefore, crucial that you consider which will be the best option for your own estate, and ensure that both you and your partner are comfortable with the arrangement in which you decide to be married. When having this tough conversation, consider the following points of discussion:

• Do you and/or your partner have any debts?
• If you and/or your partner do have debt, which assets have been pledged as collateral?
• What is the value of your and your partner’s respective estates?
• Do you and/or your spouse have any dependents?

Take note that it is possible to change your marital regime once you have already been married, but this will come with a lot of red tape. The best course of action is to be proactive and initiate a discussion with your partner well before your wedding day so that you have ample time to meet with an attorney and set up a prenuptial agreement that will protect both parties.