Marriage ceremony

The implications of your marriage agreement on your finances

The nature of your permanent relationship or marriage agreement has financial and tax consequences which you may or may not be aware of. You should definitely take into consideration these consequences when developing your financial plan with your partner. 

The legal obligations of your marriage contract can have an effect on your estate structuring, various tax obligations, maintenance obligation, spousal support, debt, as well as the division of assets should your relationship come to an end through a divorce, or sadly, death. Therefore, it is very important to fully understand the financial implications of how you are married or how your long-term partnership is structured.

In South Africa there are a number of marriage contracts that pertain to different legal and financial consequences which a couple can choose from. Typically, you have the option to choose between a civil marriage, civil union, or customary marriage when entering into your marriage agreement with your partner. It is vital to both be in complete agreement about the type of marriage agreement you enter into before you get married and that you are fully aware of the repercussions thereof should something untoward happen.

Civil marriages

When entering into a civil marriage, in community of property is the default matrimonial property contract. This is unless the couple chooses to enter into an ante-nuptial contract. If this is the chosen agreement, the couple can choose to be married with the accrual system, being the default option for out of community marriages, or to expressly exclude the accrual system. The accrual system is essentially a formula that is used to calculate how much the spouse with the larger estate must pay the smaller estate if the marriage comes to an end through death or divorce.

Civil Unions or Partnerships

In 2006, South Africa introduced the Civil Union Act, whereby South Africa became one of the first countries in the world to give legal protection and full marriage benefits to couples in same-sex relationships. However, contrary to popular belief, a Civil Union marriage is not limited to couples of the same sex and extends to heterosexual couples. What is important to note, however, is that Civil Union marriages enjoy the same rights, responsibilities and legal consequences as Civil marriages and that there is essentially no difference between a Civil marriage and a Civil union. As in the case of Civil Marriages, the marriage must be registered with the Department of Home Affairs, South Africa.

Customary marriage

The Recognition of the Customary Marriages Act of 1998 provides legal recognition for those married in terms of traditional African customary law. This is also fairly popular in South Africa and is outlined in terms of legal recognition being provided for both monogamous and polygamous customary marriages. This is provided that the marriage is celebrated according to the prevailing customary law of the community. Once married, the couple is required to register their marriage with the Department of Home Affairs within three months. As with polygamous marriages, the groom is required to apply to the High Court for an order that regulates the matrimonial property system of his various marriages in order to protect all the parties within the marriages.

What is the difference between being married in community of property and out of community of property?As legally recognised marriages in South Africa, parties married in terms of a Civil Marriage, Civil Union and Customary Marriage can choose whether to marry in or out of community of property. Although community of property is always the default matrimonial property regime for all three types of marriages.Couples in a legal marriage can choose from the following three matrimonial property regimes, all of which are very important to consider wisely before tying the knot!

In Community of property

This term is used a lot and you may not be 100% clear on its meaning. Essentially it refers to the absence of an ante-nuptial contract. This has important financial consequences for both parties within the marriage. Under this system, all assets and liabilities belonging to each spouse are merged together into one joint estate, so basically the ‘what’s yours is mine’ mentality. A major disadvantage of this form of marriage contract is that the couple is jointly liable for each other’s debts, including any debts which were incurred before the marriage commenced! Most importantly if you are married in community of property and one spouse becomes insolvent (cannot pay their debts), you will both be declared insolvent.

 Should one of you seek to get help with your debt and go under a debt review process, both of you will need to consent and go under the programme together. In addition, there are instances where both you and your spouse need to provide written consent with 2 witnesses i.e entering a credit agreement in terms of the National Credit Act 34 of 2005; and entering into a contract to purchase immovable property.

When it comes to freedom of testation, it is important to bear in mind that each spouse can only bequeath 50% of the joint estate in the event of their death. This is because the other half belongs to the surviving spouse. In the unfortunate event of divorce, each spouse is entitled to 50% of the joint estate which can lead to an inequitable distribution of assets where one spouse contributed significantly more to the estate than the other. 

Out of community of property without the accrual

When signing the ante-nuptial contract, couples must expressly exclude the accrual system. Under this type of marriage contract, each spouse retains their own separate estate, including all assets and liabilities. Each spouse has full autonomy over their financial affairs and their debts are kept completely separate from each other. As such, each spouse’s estate is protected from the other spouse’s creditors! Which is essentially the crux of the matter. When it comes to estate planning, each spouse has freedom of testation and is free to bequeath their assets as and when they choose. However, because duty of support is a legal consequence of marriage, the surviving spouse (in a marriage where one partner has passed) may have a maintenance claim against the deceased estate in the event that they are not adequately provided for. Where a spouse dies without a will, the surviving spouse may inherit according to the rules of intestate succession, all of which will be officiated in court. 

Out of community of property with the accrual

The accrual system is a matrimonial property regime that provides each spouse the right to share equitably in the value of the two estates to the extent that they grew during the course of their marriage. In terms of the accrual system, each spouse exercises full control over their own estate and has full contractual capacity thereof. In addition, each spouse is responsible for their own debt and their estates are protected from their spouse’s creditors. Should the marriage comes to an end either through death or divorce, the growth in each spouse’s estate during the subsistence of the marriage is calculated and shared equitably between the two spouses. Therefore, in the event of divorce, the spouse with the smaller estate will have a claim against the spouse with the larger estate for their share of the accrual. Similarly, where the spouse with the larger estate is the first-dying, the surviving spouse will have a claim against his deceased estate for her share of the accrual, making estate planning particularly important for the couple. 

Domestic partnerships

Where a couple, whether same or opposite sex, chooses to live together without formalising their relationship under the Civil Union Act in South Africa, their relationship is not regulated by law. This can have far-reaching legal and financial consequences for the couple should something happen to damage or end the partnership. South African law confers no legal status on cohabiting couples and, as a result, no duty of support exists between these couples living together. This means that should the relationship come to an end, one partner will not be able to claim maintenance from the other partner. Even if the partner was financially dependent on the other partner during the relationship.

However, the same does not apply to child maintenance, if the couple have a child. Both parents have a legal duty to support their children regardless of their marital status.

It's clear that both yourself and your partner need to be crystal clear on the type of marriage agreement you choose to sign when tying the knot! You want to be sure of the legal and financial implications that being married can have on you personally and be happy with your decision!