What do I need to know about being married in community of property?

If you and your spouse are married “in community of property”, it means that, with some exceptions, you share equally everything you own and owe. Although at first glance this may seem like an equitable arrangement for any married couple, it has financial implications that may count against you, especially if your marriage ends through divorce or death.

How is one married in community of property?

In South Africa, civil marriages are, by default, in community of property. It is only if you and your partner wish to marry out of community of property (see “Under what marital property regime am I married?”) that you need to put it in writing in the form of an antenuptial contract, which is then registered at the Deeds Office. In other words, if there is no contract, you and your spouse are automatically married in community of property.

What happens with my existing property?

In the legal sense, your “property” refers to everything you own, down to your toothbrush – things you have bought in your name or been given or inherited. Your assets and those of your partner are pooled in a “joint estate”, which you share equally and you manage together. An exception is if you have inherited, say, a residential property, and the will of the person who bequeathed it to you specifically stated that it should not form part of any joint estate. That property will then fall outside of your joint estate.

Any business assets owned by either partner, such as shares in a business, intellectual property and business equipment, also fall under the joint estate.

What happens with any debts we have?

In the same way that your assets are owned jointly, so are your debts, and you become equally responsible for those debts. If you or your partner owes money – for example, on a car loan – going into the marriage, then you will become equally liable for that loan.

If your spouse has maintenance obligations to an ex-spouse or children from a previous marriage, they remain his or her responsibility. However, these payments may indirectly affect the joint estate and your shared resources.

What are my obligations to the joint estate?

Anything you or your partner buy or sell, or any debt you acquire during your marriage affects the joint estate. Therefore it is incumbent on you to mutually consent to buying or selling large assets or taking out a loan.

The Marital Property Act requires different levels of consent for different types of transactions. For example, selling household furniture requires only the verbal consent of the other party. On the other hand, buying or selling immovable property (for example, a residential property) or entering into a credit agreement under the National Credit Act requires written consent signed by both of you plus two witnesses.

If your partner gets into financial trouble and cannot repay his or her debts, any legal action against your partner will affect you as well. Your credit record will be equally adversely affected and if your partner is issued with a sequestration order, the entire joint estate will be declared insolvent.

What happens if we get divorced?

This depends to a certain extent on the nature of the divorce. If the divorce is amicable, then, unless a divorce agreement dictates otherwise, the joint estate is equally divided between the two of you. If you do not agree on how the assets and liabilities are to be divided, the court may appoint someone to do it for you – this may entail selling assets such as a residential property in order to cover debts.

If the divorce is not amicable and, for instance, during the divorce proceedings your partner tries to gain from the break-up by selling off assets without your consent, you may apply to the court to intervene. The court may grant you full control of the estate and, if necessary, impose a forfeiture order on your partner whereby he or she forfeits certain assets to compensate you.

What happens with retirement-fund benefits on divorce?

The amount to which you are entitled from a retirement fund at any given point in time is known as your “pension interest”. Although the Matrimonial Property Act does not explicitly include pension interest as part of the joint estate, courts have consistently held that a member's pension interest in a retirement fund is an asset capable of valuation and division on divorce.

What are my ongoing obligations to my ex-partner after divorce?

The law in South Africa favours a clean break between divorcing spouses to minimise ongoing financial obligations and give each party the chance to begin their life afresh. However, under any of the three marital property regimes, the court will make provision for the maintenance of any minor children from the marriage and, under certain circumstances, will order maintenance for a spouse who has been financially dependent on a partner.

What happens when one of us dies?

On the death of you or your partner, the joint estate does not simply split automatically. The entire joint estate is dissolved and must be wound up by an executor, and all debts owed by the estate (except for funeral and burial costs) must be settled. What remains is split, with half going to the surviving spouse. The deceased spouse’s half is distributed according to his or her will or, in the absence of a will, according to South Africa’s laws of intestate succession.

In the will, the deceased spouse may have left his or her entire half of the joint estate to the surviving spouse, but the process nonetheless needs to be overseen by an executor and approved by the Master of the High Court, and it will attract executor’s fees.

Don’t forget that you assume half of any business interests your partner may have had and may find yourself suddenly responsible for a business you don’t know how to run or what to do with.

Remember that on death, the fund trustees must decide how to allocate the retirement benefits to dependents and nominees equitably.

What happens with life insurance benefits on the death of a spouse?

This depends on whether or not the deceased spouse nominated beneficiaries on his or her life policy. If there are nominated beneficiaries, the money paid out by the insurance company goes directly to the nominated beneficiaries, bypassing the joint estate. The surviving spouse will not have a claim on the payout if not named as a beneficiary.

If there are no beneficiaries named on the policy, the payout is made into the joint estate, which is distributed as explained above.

This article was reviewed by Wessel Oosthuizen, head of financial planning at Fiscal Private Client Services and the former director of the Centre for Financial Planning Law at the University of the Free State.