Marriage Finances 101: Approach getting married with a view to divorce

There are countless TV shows and bubbly pop songs which elevate and celebrate the magic of the marriage ceremony…the dress, the cake and the goodwill which accompany the manner in which young couples enter the lofty realm of matrimony.

Far less attention, however, is paid to the important decision which should precede your guest lists and seating arrangements: the decision as to which matrimonial property regime you’d like to govern your marriage relationship.

So let’s break it down…
In South Africa there are three options to choose from:

• In community of property (the primary matrimonial property system)
• Out of community of property
• Antenuptial contract with the inclusion of the accrual system

If no antenuptial contract is entered into, you and your spouse will automatically be married in community of property. You’ll then become joint owners of all assets owned at the time of the marriage and acquired at any time after. No formal transfer of assets is necessary, as the creation of the joint estate is automatic.
At first glance, being married in community of property seems equitable, but it can lead to difficulties in administration and can expose both spouses’ assets to creditors. For example, if your spouse gets into financial difficulties, his or her creditors can look to the joint estate – including your assets – for settlement of debts.

If you’re intending to be married in community of property, it’s also important to ascertain any pre-existing liabilities your spouse may have, as these too (with limited exceptions) will form part of the joint estate.

As far as the administration of the joint estate is concerned, there are also a number of instances where the joint written consent of both spouses (either with witnesses or without) or oral/tacit consent is required before the transaction becomes valid. As a couple, it’s important for you to be educated as to what these requirements are. If you don’t, you may create hardship for yourselves – and your creditors.

Ultimately, penny-wise but pound foolish couples who wish to avoid the expense of consulting with an attorney prior to their marriage may find themselves married in terms of a regime which doesn’t suit their lifestyles – or a regime they do not fully understand.

Most couples will elect to consult with an attorney and enter into what is known as an antenuptial contract. This document is usually entered into before a notary (an attorney with an additional qualification as a notary) and registered in the Deeds Office.

An antenuptial contract automatically incorporates the accrual system unless it is specifically excluded by the contracting parties. The contract must then specify that community of property, community of profit and loss and the accrual system are excluded.

If you as a couple expressly exclude the accrual system and are accordingly married out of community of property, you’ll both essentially be in exactly the same position financially as you were before marriage. Your estates will be entirely separate and there is no sharing of wealth or liabilities. This can, of course, create hardship for the poorer spouse on divorce.

The accrual system in terms of an antenuptial contract is a system where, for the duration of the marriage the spouses’ estates are completely separate:

1. They cannot be sued for debts incurred by the other spouse
2. They have no claim to any assets the other spouse accrues during the course of the marriage unless they get divorced. Should they divorce, the accrual system comes into play and the estates of the spouses are valued for the purposes of the accrual sharing.

When you enter into the antenuptial contract, you may decide to include what is known as a “commencement value”, which is the nett value of your estate as at the date of the marriage. You may also exclude certain assets in the antenuptial contract. In addition, you could also elect to state a nil commencement value in the antenuptial contract, which is usually the case with young married couples who have as yet not accumulated any assets.

The accrual claim is essentially ½ x (larger accrual less the smaller accrual). The accrual in a spouse’s estate is the net asset value of their estate at the end of the marriage less the commencement value (which must be increased to take into account the fluctuation in the value of money) and less any assets which may have been excluded in the antenuptial contract. There are a number of other assets which, in addition, fall to be excluded from the accrual calculation including inheritances, legacies, donations.

Naturally, if your spouse’s debts exceed their assets, their accrual will be nil. An accrual cannot be a negative figure.

Whilst the accrual system and being married out of community of property may seem the fairest and the safest route to follow when entering into marriage, this fairness may become skewed in a situation where either you or your spouse has accumulated substantial wealth prior to the marriage. In this situation, once the large commencement value has been increased to take into account the current day value of money, there may be little left for the other spouse to share in. These are all issues which need to be examined carefully when entering into an antenuptial contract.

In addition, the balance of bargaining power between prospective spouses is often not evenly balanced. This can lead to an “unfair” agreement being concluded – which prejudices the spouse who elects to stay at home, look after children and the home, and not further his or her career.

Whilst it is not always pleasant for couples to consider the financial minutiae of their relationship prior to marriage (and it can become an emotional and intricate process), it is vital you finalise this aspect of your marriage early on. This helps to give both you and your spouse enough time to consider your options without being pressured by a looming wedding date.

By Gillian Lowndes, attorney specialising in family law