It is often mistakenly believed that people who got married out of community of property were solely preparing for a divorce. As portrayed in many movies, one partner is usually shocked and offended when the other suggests signing an antenuptial contract.
To summarise, when you get married in community of property, all liabilities, and assets before and after marriage, with some exceptions, become part of your joint estate- the familiar “What’s yours is mine and what’s mine is yours”- expression comes to mind.
If you get married out of community of property, your assets and debt remain your own and vice versa.
Now, some of you will be worried about getting married out of community of property. You have heard many stories.
A popular concern is that you support your spouse during his/her studies. You work hard until your spouse reaches his/her dreams and becomes financially independent. Then your spouse leaves you and you are left with “nothing”. You will not even have a claim against his/her pension fund.
We completely understand this concern, and it is an unfortunate situation if you are left with nothing after giving up so much of your time and energy. It is important to note that, if you are married in community of property he/she will also have a claim against your pension fund. It works both ways. You will also be liable for 50% of the debt.
If you are married in community of property you can, however, ask for a forfeiture order to be granted or settle on different terms during the divorce. Both of these routes are not certain and therefore entail a risk in our view.
A forfeiture order can be granted in respect of a specific asset. If you, for example, paid the mortgage bond for many years and your spouse moved out and had not been living with you for a long time during the marriage, you can ask that your house be forfeited from the division of the joint estate. A forfeiture order is however subject to the court’s discretion.
A settlement agreement can also be reached between spouses in respect of the division of the joint estate, but will however only be made an order of court if both spouses are in agreement with its terms.
If you want to have individual estates, but you also want to prepare for the dissolution of the marriage, we suggest that you consider getting married out of community subject to the accrual system. This will allow you to keep individual estates, but at dissolution of the marriage (or even during the marriage- see Section 8 of the Matrimonial Property Act 88 of 1984 ), the spouse whose estate shows the least growth will have a claim against the estate of the spouse whose estate shows the most growth from date of marriage.
The implication of the accrual system is outlined in Section 3(1) of the Matrimonial Property Act 88 of 1984, which provides that at the dissolution of a marriage subject to the accrual system, by divorce or by the death of one or both of the spouses, the spouse whose estate shows no accrual or a smaller accrual than the estate of the other spouse, or his estate if he is deceased, acquires a claim against the other spouse or his estate for an amount equal to half of the difference.
This system caters for, inter alia, a spouse who supported his/her spouse to enable him/her to achieve his/her goals and as such contributed to the growth of that spouse’s estate. Perhaps he/she allowed and financially supported his/her spouse to study while he/she was working, or perhaps he/she stayed home to raise the children and supported the household.
The application of the accrual system is beyond the scope of this article as this article’s main objective is to emphasize the protection a couple may enjoy during the subsistence of a marriage and not at divorce stage.
In practice, parties to a marriage often enter into a marriage without deciding the marital regime that will be applicable to their marriage, only to be faced with consequences that they did not prepare themselves for.
We understand that every situation is different and in order to make the best decision in this regard, we strongly suggest that all couples consult with an attorney prior to making a final decision.
Either marital regime could provide some relief at divorce stage, or not. The point which we are desperately trying to get across is that it’s not only about preparing for a divorce.
it’s not only about preparing for a divorce.
The remainder of this article will focus on the protection from creditor claims during the marriage.
Here is a short love story:
Samantha and James Smith got married out of community of property in December 2014. After the wedding the couple moved into Samantha’s home which was registered to her name. They sold James’ bachelor flat and most of his ugly furniture. Samantha compromised by letting him keep the strange looking wooden clock he made when he was 5 years old. She loved how proud he was of it. She loved it even more when it was out of sight.
Samantha’s next birthday was coming up in October 2015.
James was planning a big surprise for her. He ordered a beautiful diamond necklace from one of the best jewelers in town. He signed an agreement with the shop to design and create the necklace. He knew at the time that he would be liable to pay for the necklace upon completion. He asked the jeweler to order enough diamonds to give it that “something extra”. The jeweler quoted James R200 000.00. Nothing was too expensive for his darling wife. James paid a deposit of R150 000.00 without blinking an eye.
By July James’ business was blooming and he was reaping what he believed to have been the fruit of his hard work. He thought that things were going very well when he employed a new manager, Mike. Mike constantly attracted new clients. Mike even told James he didn’t need to come into the office every day. Mike “handled everything”.
In August, James and Samantha went on a very expensive holiday. He spent well over his budget on this holiday, but he convinced himself that he deserved it. After all, he worked hard to get to where he was. He was sure that the money for the necklace would be available in October. Mike was “handling things”.
September came. Mike disappeared. The business accounts were all empty and creditors were lurking around like hungry wolves. James was horrified and broke. The jeweler called him three times a day, advising him that the necklace is ready. He had to pay the remaining R50 000.00 and collect it. James tried to negotiate a deal but the jeweler reminded him of their contract. He was liable for the full amount. The next week the jeweler commenced legal action against him.
James couldn’t even buy Samantha a chocolate for her birthday. He felt terrible. The business was folding and Mike was nowhere to be found. Mike left James’ business in a lot of debt. One Million Rand to be exact. Unfortunately, James signed surety agreements for the business debt which meant he could personally be held liable for the business’ debt.
Many judgments were taken against his business and he was cited. The Sheriff first arrived at the business premises and removed all business assets. It was sold on auction for about R500 000.00. The remainder of the debt could now be claimed from James personally.
James’ personal debt was also not being adhered to as the business could no longer pay his salary. The jeweler sold the necklace on auction for R65 000.00 and agreed that the account, which included legal costs and interest, was now settled.
Creditors in respect of his credit cards and clothing accounts had all commenced legal action. Luckily, Samantha did not sign as surety for any of James’ personal debt.
Their house and the furniture belong to Samantha’s separate estate. Samantha had proof of ownership for all furniture, vehicles, and appliances. The sheriff could not sell any of these items, because they were married out of community of property.
James and Samantha had a roof over their heads, a bed to cuddle in and a TV to distract James from his business’ failure and future problems.
The Sheriff was welcome to remove the wooden clock, of course!
James had time to pick up the pieces and today he is once again a successful business owner … this time he will be “handling” his own things.
This would have been completely different, had they been married in community of property. This serves as an illustration of a happily married couple not losing everything and as such enjoying protection thanks to a marriage out of community of property.
If you would like to get married out of community of property, you need to approach a special kind of Attorney, called a Notary, to assist you prior to the wedding. The Antenuptial Contract will be formally registered, a requirement for it to be binding to third parties (creditors). If you do not approach a Notary and if it is not registered as it should be, you will be married in community of property as far as third parties are concerned, even if you signed the agreement.
If you are already married in community of property, you can change your marital regime to out of community of property by means of a High Court Application. This could be quite costly and the outcome is subject to the court’s discretion. The court will consider, along with other factors, whether your creditors’ rights will be adversely affected by the change.
In conclusion, we believe that a marriage out of community of property could be quite romantic. By limiting the creditor’s rights, you’re basically protecting each other. “Us against the world” suddenly sounds much more romantic compared to “What’s yours is mine and what’s mine is yours”.
“Us against the world” suddenly sounds much more romantic compared to “What’s yours is mine and what’s mine is yours”.
It is important to note that you cannot “win” or “lose” a divorce case. The main objective should always be to allow the parties to negotiate the terms of the divorce and to let them settle accordingly. Neither party should at any stage of the divorce feel bullied or threatened. Too often spouses are manipulated into cutting attorneys out of the equation as far as possible to save costs. Usually this suggestion is made by the spouse who has something to hide. Don’t fall for this.
There are two legal routes in respect of divorce matters. The contested or the uncontested route. Ideally you should try to follow the uncontested divorce route. A contested divorce matter may take years to finalise, which could drain you financially.
Unfortunately, most divorce matters are loaded with emotions and unresolved feelings which could potentially complicate these matters even further.
Uncontested divorce matters are fast and affordable. However, it is not always the best option to opt for the “quick and cheap” divorce. If you do not know what your rights are you will not know how to enforce it, nor will you realise it when you waive those rights. Once a divorce is granted, it is a final and binding court order.
If there are certain topics that you and your spouse cannot come to an agreement with, chances are that the divorce will be contested. It is sometimes necessary and for the best to contest a divorce matter, and even if you do so, the matter can be turned into an uncontested matter at a later stage when you’ve settled.
Sometimes couples prefer to approach the same attorney to save legal costs. This can be done in uncontested matters. Many attorneys have fixed fees in this regard. However, it is important to note that the attorney is not representing both spouses or necessarily acting in the best interest of both spouses as this would technically result in conflict of interests. In fact, the attorney will be representing the Plaintiff, unless otherwise stated. Therefore, it is advisable to pick your own lawyer to advise you. The cheap and easy way out may seem appealing now, but years later, after everything was said and done, the last thing you’d want to do is look back and wish you knew what you were doing.
If your marriage is heading for a divorce, the best way to ensure that you do not waste anybody’s time and money, especially your own, is to be well prepared before you pick a lawyer.
Pick a Lawyer has prepared the following guidelines to assist with this preparation:
|1.||UNDERSTAND AND COME TO TERMS WITH THE REASONS WHY THE MARRIAGE HAS IRREVOCABLY BROKEN DOWN|
|Why are you getting a divorce? As soon as you have established what the reasons are, it will be easier to proceed with the preparation.
Sometimes couples reconcile while the divorce is on-going. It is not completely uncommon for an attorney to receive a phone call to halt the divorce matter a day before the matter is to be heard at court. Unless otherwise agreed, your attorney will still be entitled to charge for services rendered. It may therefore be a good idea to go for couples counselling, therapy or to have a family meeting about it before you pull the plug. Try not to make any rushed decisions. Divorce is a big step to take and you need to make sure that it is in fact what you want.
It is important to note that, even if you do not want a divorce, the court will most likely grant the divorce if your spouse is adamant about getting a divorce. Your refusal will not be enough to stop the divorce from eventually happening.
Another often misconceived fact to note is that in South Africa it is not a crime to have an affair. Attorneys do not, as it is portrayed in many movies, require evidence of the affair. So best to leave those photographs and printed chat histories in your drawer where it belongs. You can mention it to you attorney and only provide it to your attorney if your attorney requests it.
|2.||UNDERSTAND THE IMPLICATIONS OF YOUR MARITAL REGIME AND YOUR RIGHTS ACCORDINGLY|
|This will be helpful to determine which assets and liabilities belong to you, and which do not. Assets include furniture, immovable property, pension funds, investments, vehicles, and pets. Liabilities include mortgage bonds, personal loans, accounts, and other debt.
You are either married in community of property or out of community of property. If you are married out of community of property the accrual system is either applicable or not applicable.
If you signed a valid Antenuptial Agreement before your wedding day you are married out of community of property and if you did not enter into such an agreement prior to your wedding day- or during the marriage through a High Court Application – you are married in community of property.
If you are married out of community of property, all assets and liabilities you had prior to the marriage, and all assets and liabilities attained during the marriage remain yours, and all your spouse’s assets and liabilities remain your spouse’s assets and liabilities.
If you are married out of community of property with the accrual system, you still have two separate estates, however, the estate that showed the most growth from the date of the marriage to date of the divorce will need to contribute to the estate that showed the least growth during the marriage. Your attorney will assist with these calculations once you have a proper inventory of all the assets.
It is important to note that you can settle on other terms. If, for example, your spouse purchased a vehicle on his/her name, but you were the one who paid the premiums during the marriage, and it is now paid in full, you may negotiate to receive the vehicle even though it is registered to your spouse’s name. If the matter is contested, the court may decide on the matter.
If you are married in community of property, all assets and liabilities of both spouses attained prior to and during the marriage become shared assets and liabilities. You only have one estate and each spouse has a 50% share in the estate. There are exclusions to the rule, one being assets that were inherited and specifically excluded from the joint estate by a will. If you are uncertain about certain assets, make a list of those assets as well.
Spouses married in community of property share one estate, which means that each spouse technically owns 50% of every asset (including a 50% share in each other’s pension fund) and each spouse is 50% liable for each debt. You are already joint owners and you therefore need to settle on different terms if you wish to do so. For example, if you have two vehicles you can propose that you keep the one vehicle and your spouse keeps the other vehicle. Another example is if you own a house, and would like to stay in the house, you can agree that you keep 100% of the house and your spouse receives other assets (preferably of equal value to his/her 50% share in the house) in return. It is not necessary to cut everything in half with a chain saw, even if that does sound appealing at times. If you cannot agree on how to divide the joint estate and the matter becomes contested, the court will most likely order you to sell everything and share the proceeds equally.
|3.||THINK OF THE CHILDREN|
|Come to terms with what you believe will be in the best interest of the children in respect of custody and their primary residence. In most cases it is best not to move the children to new homes and schools as this may disrupt them. Familiarise yourself with co-parenting plans and discuss it with your lawyer.|
|4.||UNDERSTAND YOUR MAINTENANCE NEEDS|
|a.||SPOUSAL MAINTENANCE: If you are financially dependent on your spouse, or if your spouse is financially dependent on you, you need to understand that spousal maintenance can be claimed. You can agree to the amount and the expiration date. If this becomes contested the court may take relevant factors into account before granting such maintenance order, such as the dependent spouse’s actual needs, career, age, health etc. It will save time if you calculate the exact amount that you will need from your spouse or the amount that you will be willing to pay towards spousal maintenance (if any). Start making a list of your own income and expenditure to see how much you will need from your spouse to maintain the lifestyle you have or what you can afford to pay towards spousal maintenance.|
|b.||CHILD MAINTENANCE: Start making a list of all the expenditures related to the children’s housing, food, clothing, education, stationary, Medical aid, other medical expenditure, outdoor activities, sport, entertainment etc.
It always helps to have a figure in mind to work with prior to meeting with an attorney.
|5.||DISCUSSION WITH SPOUSE|
|We know this is not always possible or safe to do, but it will be beneficial to discuss the abovementioned topics with your spouse to understand what you agree to. If there are certain topics that you cannot agree to, chances are you are going to have to start a contested divorce. It is therefore recommended that you try to compromise where possible and to try to resolve most of each other’s concerns.
After following the abovementioned guidelines, pick a lawyer to assist you. Your lawyer will usually provide you with a list of additional documents and information required to enable him/her to proceed with the matter.