Thinking of getting married? Congratulations! But before you tie the knot, you should know that your marriage contract – how you are married – can have a big impact on your finances.
In South Africa you can be married in or out of community of property. There are some key differences between these two, especially when it comes to money.
We go into more detail below, but essentially what you need to know is that when you are married in community of property your finances are shared equally. So, all your assets, earnings and debts are shared equally.
When you are married out of community of property, you don’t share finances unless you have the accrual system – which means you share only the assets and earnings you acquire when you are married.
Here are the details of the different kinds of marriage contracts in South Africa.
When you are married in community of property:
- You are equal partners and share everything equally, including assets and debts. So if your spouse incurs a big debt you are jointly liable. If they cannot pay, the creditor can ask, and insist, you pay the debt.
- Inheritances are usually excluded so the house your aunt left you in her will isn’t part of the marriage assets, so your spouse has no claim on it, nor do their creditors.
- You may need your spouse’s permission to do certain things including taking credit, selling a large asset or standing surety for a loan. If you wanted to take a mortgage, you may need permission from your spouse. This is to make sure you don’t become liable for your spouse’s debt without your knowledge, but it can create more admin and paperwork.
- If you divorce, your assets will be split equally between you and your spouse. This could mean you have to sell the house you both lived in, unless one spouse agrees to pay half the value of the house to the other spouse.
Pros and cons
Getting married in community of property is the easiest and cheapest way to get married because you won’t need to visit a lawyer to draw up a contract. But if one partner runs up debts it can be problematic for the other spouse’s finances.
When you are married out of community of property with the accrual system (also known as an antenuptial contract):
- Your assets at the start of the marriage are yours and yours alone. Your spouse cannot access them, and they cannot be used to pay your spouse’s debts without your permission.
- Everything you acquire during the marriage is shared equally, apart from inheritances. If the marriage ends in divorce you would retain the assets you had before you married, and equally split the assets and earnings you accumulated while you were married.
- You are not liable for your spouse’s debts unless you have stood as surety. And you don’t need their permission to enter into financial contracts. So unlike a community of property marriage, you can buy a house and take a mortgage without having to get permission from your spouse.
Pros and cons
A lawyer needs to draw up the marriage contract for an out of community of property marriage. The cost for this starts at around R2 000. The advantage to being married out of community of property is that you have financial independence and are not liable for your spouse’s debts.
When you marry out of community of property, the accrual system applies unless you specifically exclude it in your contract.
When you are married out of community of property without the accrual system:
- Everything you own and earn before and during the marriage belongs to you. So there is no sharing of earnings while you are in the marriage and there are no joint assets.
Pros and cons
The concern with this type of agreement is that it isn’t fair on a spouse who gives up or downscales their career to take care of children. If this marriage ends in divorce, the spouse who stayed at home has no right to any money from the other spouse, which could be financially devastating. A marriage out of community of property with no accrual system is usually only suitable if both parties are independently wealthy when they marry.
Can you change your marital contract?
Yes, you can. For example, you may be married in community of property and want to change to being married out of community of property with the accrual system. However, this is a legal process so it can be expensive. In addition, if you are doing it just to avoid being liable for a spouse’s debts, anyone owed money can object to the change and stop it.
What about civil unions and customary marriages?
For civil unions, the three types of marriage contacts we looked at above apply. You can decide to be married in community of property, or out of community of property with or without the accrual system. A civil union is exactly the same as a marriage. In South Africa the Marriage Act allows for marriage between a man and a woman. In 2006 marriages between same sex couples was legalised in the Civil Union Act, and this marriage is called a civil union.
If you have a customary marriage that is recognised by the Customary Marriages Act, you are married in community of property unless you have an out of community property contract. You can check with your lawyer or the Department of Home Affairs to see if your marriage is recognised as a customary marriage.
If you are living together, even if it has been for a very long time, you are not regarded as legally married. So, unless you have a contract, your assets and earnings and debts are your responsibility.
How to decide on a marriage contract?
Getting married is a joyous milestone in your life. While you are making decisions about wedding dresses and where to live, spend some time thinking about this important decision that could seriously affect your finances – and your children’s -in years to come. Marriage is a partnership, so you need to decide together if you want to be married in or out of community of property. If you are happy sharing all the assets and perhaps being liable for your spouse’s debts, you can consider an in community of property marriage. If you want to be able to enter into financial contracts, however, you may decide to get married out of community of property with the accrual system.