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Matrimonial Property Regimes
It is extremely important that both parties wishing to marry understand the implications of the type of matrimonial property regime they are about to enter into. Unfortunately, couples focus so much on the marriage ceremony itself that they completely forget the implications of neglecting to make an informed decision regarding the marriage regime, in the unlikely event that they do divorce.
In accordance with the Matrimonial Property Act 88 of 1984, which came into operation on 1 November 1984, there are three forms of matrimonial property regimes in South Africa, namely:
- Marriages in community of property;
- Marriages out of community of property;
- Marriages out of community of property with accrual.
Marriages in community of property
A marriage in community of property is undoubtedly the cheapest and most popular form of all the matrimonial regimes, although deeply flawed. No antenuptial contract is required, so if you marry without an antenuptial contract, you will by default be married in community of property. In this form of marriage, the spouses’ estates (what they own/assets and any debt/liabilities) are joined together and each has the right of disposal over the assets; they are equal concurrent managers of the joint estate. Each has an undivided or indivisible half share of the joint or communal estate.
All assets belonging to the spouses prior to getting married and all assets that they may accumulate during their marriage will fall into the joint or communal estate. There are a few exceptions, where certain assets may not be included in the joint estate. For example, if a will stipulates that an inheritance should not form part of the joint estate, then that inheritance cannot become part of the joint estate.
All liabilities incurred by both spouses prior to and during the marriage are considered liabilities of the communal estate. So, if one spouse comes into the marriage with a lot of debt, his/her debt will then form part of the communal estate. Such debt may include contractual debt, maintenance payable to an ex-spouse from a previous marriage and even maintenance payable to extramarital children.
Each spouse has the capacity to bind the joint estate through their actions. For example, if a spouse has his/her own business and applies for an overdraft, and the business fails to pay the overdraft, a claim can be made against the joint estate. However, there are circumstances where a spouse must first obtain the consent of the other spouse before he/she can bind the communal estate. Where a spouse binds his/her separate estate, such as a car or business in his/her name, through a debt, the creditor can lay claim against the private estate of that spouse. If that spouse’s private estate has insufficient assets to satisfy the creditor’s claim, only then can the creditor lay claim against the communal estate.
One of the most devastating consequences of a marriage in community of property is that when one spouse becomes insolvent (cannot pay his/her debts), both spouses will be declared insolvent, because there is one communal estate. If there is a court order against either one of the spouses, the communal estate can be lost.
Managing the joint estate
Each spouse has equal management of the joint estate; however, the consent of the other spouse is needed for certain transactions. Although you have to acquire the consent of the other spouse to alienate joint assets of the estate, written consent is only required in certain instances.
Examples of instances where no consent from the other spouse is needed, i.e. where one spouse may act independently, to perform acts binding on the joint estate, include:
- making deposits at a banking institution;
- making donations to third parties that do not prejudice the other spouse;
- forming a company or trust;
- entering into a transaction on the stock exchange;
- entering into a contract in the ordinary course of his/her business;
- selling certain movable assets, such as a car; and
- performing transactions in the course of his/her business, trade or profession.
The Matrimonial Property Act categorises acts where a spouse needs the consent of the other spouse to enter into a valid transaction under the following types of consent:
In certain instances, only informal consent from the other spouse is required. In these instances, oral consent is sufficient. The following types of transactions fall into this category:
- receiving money that is due to the other spouse, from sources such as:
- an inheritance, donation or prize;
- remuneration, bonuses, allowances, earnings, a pension, a gratitude for services rendered or by virtue of their profession, trade or business, or damages awarded for the loss of income from any of the aforementioned sources;
- income from his/her separate property, for example rent money earned from renting an immovable property;
- dividends or interest on investments in their name; and
- the proceeds of an insurance policy;
- the alienation or burdening (i.e. selling and pledging) of common household furniture, such as washing machines, stoves, bicycles or pets; and
- donating from the joint estate where the donation unreasonably prejudices the interests of the other spouse, such as donating furniture from the common household.
The following acts may only be performed with the written consent of the other spouse:
- alienating or burdening assets of the joint estate, kept mainly for investment purposes, such as stamps, works of art, jewellery or coins;
- alienating, ceding or burdening insurance policies, mortgage bonds, fixed deposits, shares, stocks or any of the other spouse’s investments at any financial institution; and
- withdrawing money from any account held in the name of the other spouse.
Written consent with two witnesses
The following acts may only be performed with the written consent of the other spouse, signed by two witnesses:
- alienating immovable property, such as a house, townhouse or farm, belonging to the joint estate;
- entering a credit agreement in terms of the National Credit Act 34 of 2005; and
- entering into a contract to purchase immovable property.
Prior written consent with two witnesses
In some instances, a spouse must give his/her consent prior to the transaction. It cannot be ratified later. The following acts may only be performed with the prior written consent of the other spouse, signed by two witnesses:
- entering into a contract of surety, where one spouse binds the communal estate as a surety for debt of a third party; and
- the actual alienation or burdening of immovable property belonging to the communal estate or the actual granting of the rights (selling or giving a third party a share in the property) over such immovable property.
When a spouse enters into a transaction requiring consent without the consent of the other spouse, our law favours the rights of the third party with whom the spouse contracted. If the third party doesn’t know or can’t reasonably have known that consent wasn’t given, then the transaction is valid. The innocent spouse is, however, given some protection. When the communal estate is divided at the end of the marriage, the court will make an adjustment and the innocent spouse will be compensated accordingly.
Advantages of marriage in community of property
- You don’t have to enter into a special contract before being able to get married.
- When you are the financially weaker spouse, you get to share in the assets of your spouse.
Disadvantages of marriage in community of property
- When you are the economically stronger spouse, you have to share your assets with your spouse.
- You are jointly liable for each other’s debts. This is particularly problematic on insolvency.
- The joint administration of the estate is rather complicated.
- When a marriage starts to fail, it can become difficult to obtain joint consent.
Suing for damages
Spouses married in community of property cannot sue each other for damages. It would be pointless as money taken from the joint estate to pay the one spouse will simply fall back into the joint estate.
There is an exemption to this rule. A spouse can sue the other for non-financial loss arising out of bodily injuries caused by the other spouse. For example, if the wife is a passenger in a car driven by her husband, and because of his negligent driving they are involved in a car accident, she can sue him for her pain and suffering because it is a non-financial loss. She can’t sue him for her medical expenses, since they are considered a financial loss. Damages that she recovers in respect of the non-financial loss (damages paid to her for pain and suffering) will fall into her own estate, outside the joint estate.