Prepare for anything: What is the significance of the marriage contract that you sign?

As the wedding day draws closer many couples sign a contract that they don’t know much about due to the excitement on the fast-approaching special day. Make sure you understand the impact this contract can make in the future.

Divorce isn’t the first thing that comes to mind when you are about to take your vows. Did you know the divorce rate in South Africa is on the increase?  25 326 divorces were granted in 2016. No one plans a divorce but be sure to know how your estate will be split if it should ever happen.

Before you get married it is important to understand both you and your future spouse's financial situation. Debt can play a big role in marriage and often has a negative impact.

There are two types of marital property regimes in South Africa and these include:

  • Marriage in community of property
  • Marriage out of community of property.

Marriage in community of property:

If you have not signed an ante-nuptial contract and you have not entered any other contract before the marriage date, your marriage will automatically become in community of property. All the assets and liabilities (such as debt) accumulated before and during the marriage are now the responsibilities of both partners. Your debt becomes your partner's debt and their debt becomes yours.

During the marriage, this means both partners are responsible for each other's debt, you may end up having to pay for your partner's debt if they are not able to pay. The creditors can also contact you. This also means that one spouse does not need the consent of the other for transactions, including banking transactions. This can become a sticky situation if your partner decides to accumulate more debt under your joint estate during your marriage.

Often, your spouse's financial situation can catch you off guard. Studies have shown that money causes approximately 70% of friction between couples.  The biggest downfall of this type of marriage is if your spouse has a lot of debt, their debt becomes your debt. Discussing your financial situation with your partner can make your marriage a happy one. In the event of a divorce, the estates of both parties will be split equally, including your partner's debt.

Marriage out of community of property:

An ante-nuptial contract is needed to enter this type of marriage, this costs around R2000. Both spouses keep their estates separate but there can be some exceptions if stipulated in the ante-nuptial contract. If you have not excluded the accrual from your contract, you will automatically be married out of community of property with accrual.

Without accrual:

Each partner will have control over their own estates, they will stay separate. The assets and liabilities each partner had before the marriage will stay separate. The assets and liabilities the partners acquire during the marriage will also remain separate from each partners estate. In the case of a divorce, both partners will keep their own estates including the growth in their individual estates acquired during the marriage. The biggest downfall of this type of marriage is that in the case of a stay-at-home spouse. They are not able to grow their own estate during the marriage and are not able to claim any of their spouse's estate. The stay-at-home spouse might be put in an unfavourable position in the case of a divorce.

With accrual:

In this type of marriage, both partners remain in control of their own estates during the marriage. They can share the growth they acquire during the marriage equally. Everything you had before the marriage remains yours but everything you acquire during the marriage can be shared equally. The term ‘accrual’ means the net increase in value of a spouse’s estate since the date of marriage. During a divorce, you can implement your right to accrual. An advantage of this type of marriage is that each spouse is not responsible for the other spouse's debt, they only share the net assets. The biggest downfall in this type of marriage is that the calculation of the accrual (the separation of the estates) is a complicated process.

The type of marriage you choose is a very important choice in case you decide to get a divorce in the future. It is a good conversation to have with your future spouse. You need to be very careful that you do not make the mistake of marrying into debt.

Do your research before you take your vows.

Are you feeling overwhelmed by your debt. Click on the button below to learn more about how Meerkat can assist you in managing your debt. 

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