Advantages and Disadvantages of choosing between the different Matrimonial Property Regimes
Choosing a matrimonial property regime as contemplated in the Matrimonial Property Act
One of the most important decisions to make before getting married is choosing a matrimonial property regime to be married under. Your marriage contract has future financial and legal implications. It is thus imperative to get appropriate advice before marrying. Each matrimonial property regime is more or less suited depending on the personal, financial and business profile of the individuals. Whatever Matrimonial Regime is chosen the parties must explore and discuss their options before getting married and decide which matrimonial property regime will suit their individual needs. Each choice comes with its own set of advantages and disadvantages.
Marriage In Community of Property
This form of marital property regime is referred to as the default option as no antenuptial contract needs to be signed. In the absence of an antenuptial contract, the couple will be deemed to be married in community of property which may not be the ideal system to be married under.
Advantages of a Marriage In Community of Property
A negligible advantage of this system is that there are no legal costs for the registration of an Antenuptial contract. Under this system, all assets and more importantly liabilities and business risks of the spouses are shared and unified together into one joint or communal estate, subject to a couple of exclusions. Both parties share equally in any profit or accrual. The disadvantages are worthy of mention.
Disadvantages of a Marriage In Community of Property
One of the greatest disadvantages of this marital regime is that the couple remains jointly liable for each other’s debt and current business risk, including debt that was incurred before the marriage. In a community of property marriage, one spouse has the capacity to bind the joint estate through their actions which can have devastating effects especially in the case of insolvency. If one spouse is unable to pay their debts, their creditors have a claim to the joint estate which can lead to both spouses being declared insolvent.
The management of the joint estate can also be cumbersome as spousal consent is needed in certain circumstances, such as selling fixed property, withdrawing from a joint bank account, or selling assets from the joint estate. Having the limited contractual capacity and impaired freedom to trade may not be ideal and can cause anger and frustration. Spouses married in community of property share a credit record. Careless financial behaviour on the part of one spouse can negatively impact the other spouse’s creditworthiness.
When it comes to freedom to make a will remember that any spouse may only will half of the joint estate and that the complete estate of the deceased and the remaining spouse is frozen pending finalisation of the estate, which process may take considerable time.
On dissolution of the marriage as a result of the death of either of the spouses or divorce, a 50/50 separation of the estate may not be a fair result, particularly where one spouse contributed considerably more to the growth of the joint estate.
Marriage in Community of Property is best suited for younger couples where there is no business risk or creditor from either of the spouses. This is an outdated matrimonial property regime full of inherent legal and financial risks. Because of the inherent disadvantages is not advisable to marry In Community of Property.
Marriage Out of Community of Property with Inclusion of the Accrual System (With Accrual)
The parties enter into an Antenuptial Agreement before getting married which matrimonial property regime excludes community of property and community of profit and loss. The accrual system as contemplated in the Matrimonial Property Act is specifically included.
Advantages of a Marriage Out of Community of Property with Inclusion of the Accrual System (With Accrual)
This system is undoubtedly the fairest marital property regime as each spouse effectively shares in the increase in the assets accumulated during the subsistence of the marriage. A Spouse that stays at home to raise children or who has less earning capacity than the other spouse is not unfairly disadvantaged as is the case in a marriage out of community of property with the exclusion of the accrual system.
The parties have separate estates and have full commercial freedom to trade and contract and no consent is necessary from the other spouse to contract. The spouses are not exposed to the creditors or business risk or insolvency of the other spouse. The parties do not share their spouse's credit record.
The contract is can be customised according to their individual needs. During the subsistence of the marriage, the position is the same as if married out of community of property, but when the marriage dissolves as a result of divorce or death, each spouse shares equally in the profit and losses made during the marriage.
Disadvantages of a Marriage Out of Community of Property with Inclusion of the Accrual System (With Accrual)
The parties must keep a careful record of transactions to be able to correctly calculate accrual at the dissolution of the marriage. In the event of death, the surviving spouse has a claim against the first-dying spouse’s estate for their share of the accrual. Additionally to the antenuptial contract, the parties must do careful estate planning,
Marriage Out of Community of Property with Inclusion of the Accrual System (With Accrual) is Best Suited
Younger couples. Especially where one of the spouses has his/her own business or where one of the spouses stays at home as a home giver or to raise kids. Most far the popular choice among especially younger couples.
Marriage Out of Community of Property excluding accrual
The parties enter into an Antenuptial contract before getting married in terms of which the Accrual system as contemplated in the Matrimonial Property Act is specifically excluded. The accrual system is thus must specifically excluded. The spouse's estates stay absolutely separate from each other. The parties have complete commercial freedom to trade and are completely independent of the estate of their spouses.
Advantages of a Marriage Out of Community of Property Excluding Accrual
Each spouse full authority and autonomy over their estate. They are protected from the creditors and business risks of their spouses and they do not share a credit record with their spouse. If one spouse incurs debt and is incapable to pay their debts, creditors have no recourse against the estate of the other spouse. A spouse's assets are protected in the event of insolvency of the other spouse. Both parties have the freedom to will their assets as they deem fit (freedom of testation)
Disadvantages of a Marriage Out of Community of Property Excluding Accrual
The parties do not share assets or accrual. Can be disadvantageous to a spouse who chooses to stay-at-home to raise children or is a home giver and thus do not have the same or any earning capacity as the spouse. In the event of a divorce, the non-earning spouse does not get to share in the estate of the income-earning spouse. At the dissolution of the marriage, this spouse will not have any claim against assets or accrual which may be unfair because the other spouse had the benefit of the other spouse being a home giver or raising the children. It is important to note that such a financially dependent spouse have a claim for maintenance against the other spouse.
A Marriage Out of Community of Property Excluding Accrual is best suited for.
Second marriages, marriages where the parties already have children, where both parties have already amassed a sizable estate or in so-called marriages of convenience or where the modern complicated dynamics of the modern family makes it unsuitable to choose one of the other matrimonial property regime.
Also, see our handy Antenuptial Contract Comparison Table.