One in two South African marriages end in divorce and, even if yours is a happily ever after, ultimately all marriages end with the death of a spouse. So before you walk that aisle, plan for the future and save the starry-eyed romance for those honeymoon rom-coms.
Sakhile Sibeko of family law firm Sibeko Incorporated; Christelle Louw, Citadel Advisory Partner; and Hilary Dudley, MD of Citadel Fiduciary, all agree on one thing – be prepared. Make sure that during – and after – your marriage, you’re financially secure.
ANTENUPTIAL CONTRACT – A NECESSITY, NOT A LUXURY
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Ahead of the wedding, consult a lawyer to draft an antenuptial contract (ANC). These contracts set the tone for your marriage and ensure both spouses are protected.
Before looking at ANCs, Sibeko says it is important to know which types of marriages are legal in South Africa.
- Civil marriages
- Civil unions. Same-sex couples can only be married in a civil union.
- Traditional or customary marriages
- Muslim and Hindu marriages
- Life partnerships. Although not a marriage, there are consequences upon break-up.
Any monogamous marriage is subject to one of the following three matrimonial regimes. ANCs need to be signed before you marry and must be drafted by a notary public, a specialist contract lawyer.
1. In community of property
- South Africa’s default* marriage regime (meaning that if you don’t sign a contract, you’ll automatically be married in community of property).
- All assets are shared – what’s yours is mine and what’s mine is yours.
- On death or divorce, all assets are shared equally between the two estates.
- All debts and liabilities are shared between the spouses and creditors can lay claim to all assets within the marriage in the case of credit default.
- If one spouse is bankrupt, both spouses will be sequestrated (where people who can’t pay their debts are declared insolvent and they have their assets confiscated by order of the court). Sequestration means you can’t get credit or hold certain career positions (especially those that are financial in nature) for a particular period of time.
- There are certain transactions that require both spouses to sign, like buying immovable property.
2. Out of community of property with accrual
- A popular choice for young couples looking to start a family.
- Each spouse has a separate estate containing the assets they bring into the marriage as identified in the ANC.
- The growth of the individual estates accrued during the marriage are divided equally between the two estates at the dissolution of the marriage.
- Spouses are not responsible or liable for their partner’s debts, making this a good option for entrepreneurs.
3. Out of community of property without accrual
- This is the simplest form of marriage contract.
- What’s yours is yours and what’s mine is mine.
- This option is favoured by older people who may have their own assets, estates and wealth, and possibly children from a previous marriage.
- When the marriage ends, each party simply walks away with their assets and whatever they paid for or invested in.
- As above, spouses aren’t responsible or liable for their partner’s debts, making this another good option for entrepreneurs.
* Note: Default marriage regimes are subject to the marriage laws of the husband’s domicile. Domicile is usually the country of a person’s birth and where they grew up. So, if a South African woman marries a French man, even if he lives and works in South Africa, the marriage will default to French law in the absence of an ANC.
These are governed by the Recognition of Customary Marriages Act, which allows for polygamous marriages. It requires the husband, prior to celebrating the new marriage, to obtain the court’s approval of a written contract intended to regulate the future matrimonial property system of his marriages.
Since the Muslim Marriages Bill is in the process of being debated, Muslim marriages are still governed by the Marriage Act.
KEEPING FINANCES FAIR
Louw gives her tips for creating a financially secure future during your marriage, as well for ensuring both spouses are financially secure in the event of death or divorce:
- Get professional, impartial, third-party advice when deciding on your preferred marriage regime. Take into consideration your personal assets, children from previous marriages, and your income stream, etc. Before signing an ANC, go through it with your financial advisor.
- Make sure both spouses are actively involved in the family and household finances. Often one person is not interested, leaving them vulnerable to the whims of their partner.
- Have a professional, third-party financial advisor help to draft your will and manage your personal investments. Avoid sharing a financial advisor with your spouse.
- Both spouses should strive to be financially independent in their own right, through salaries, passive income, inheritance, etc.
- Ensure both spouses have assets in their own name. On the death of a spouse, the estate of the deceased is frozen, so it’s important that the surviving spouse has cash in the bank to keep paying the bills until their partner’s estate is wound up.
- If one spouse isn’t working, consider a reward/salary be paid to the non-income-earning spouse to ensure financial independence for both parties. Speak to your financial advisor about a suitable financial plan and potential donations between spouses. Donations between spouses are not taxable.
- Have a family kitty. Women, in particular, will often use their own money – from their personal budget – to pay for day-to-day items for their children or for family members who may require help. However, this ends up reducing that individual’s personal balance sheet. To avoid this, create a kitty to which both spouses contribute.
- When it comes to your pension, ensure your divorce order is clearly worded so that pension funds can enact the Clean Break Principle, making sure pension revenues are divvied up at the time of divorce and not at retirement age.
WILL YOU OR WON’T YOU BE FINANCIALLY SECURE?
One of the most important documents you’ll ever sign is a will and it’s there to protect your spouse and children when you die. It determines who inherits, who winds up your estate, and who will be the guardian of minor children should both parents die.
Dudley explains that if you don’t have a will, the Intestate Succession Act has a set of rules in terms of how your estate is divided between blood relatives, which can can cause myriad problems for your spouse and your children.
She explains: “If your children are minors and you don’t have a will that provides for their money to be held in trust, then their share of the inheritance is paid into the Guardian’s Fund – until they are 18 – which may not leave enough for your spouse to look after the children.”
When it comes to creating a valid will, Dudley says:
- Use a professional financial planner because a will that’s not professionally drafted and properly executed could have faults that may lead to problems when in implementing it.
- Have a good financial succession plan (trusts, investments, etc) to protect your family’s future.
- Ask about the tax implications of inheritances. There’s no estate duty when spouses inherit, but children’s inheritances over a certain value are subject to estate duty.
- Review your will at least once a year and amend where necessary. Although a well-drafted, considered will caters for certain scenarios, the future always surprises.
- In the case of divorce, it’s important to remember that you have three months from the date of your divorce to remove your ex-spouse from your will. After that, it will be deemed that you actually want your ex to inherit if you die.