Marriage in community of property and how to change this | Legal Articles

 

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Marriage in community of property and how to change this

Marriage in community of property

Without a doubt, being married in community of property is a much cheaper matrimonial regime for couples to enter into. 

Although it is also the most popular matrimonial regime to enter into (by default), it does come with many disadvantages. 

Marital Regime Risk Management

Marriage in community of property by default

By default, couples are married in community of property if they marry without an antenuptial contract. And as such, the estates of both spouses are joined together and both spouses have equal rights with respects to their joint estate. 

They also both have claim to half of the joint estate. 

Many couples have come to regret deeply being married in community of property

Let's see why:

What happens to your assets?

Everything relating to assets which were owned by the respective spouses before the marriage and all the assets which they acquire whilst being married will fall into the joint estate. 

In certain situations an asset may be excluded from the joint estate. This could include a will which might state that an inheritance is to form no part of the joint estate.

What happens to liabilities?

The liabilities that each spouse had before the marriage and the liabilities which they acquired during the marriage all form part of the joint estate. 

Thus, when spouse with a lot of debt enters into a community of property matrimonial regime, then their debt will form part of the joint estate. 

This could include contractual debt and maintenance which is to be paid to an ex-spouse from a previous marriage or to extramarital children.

The joint estate can be bound by the actions of each spouse. This can include instances where a spouse who owns a business applies for an overdraft, but then the business fails to pay it. 

This will result in a claim being made against the joint estate. 

Depending on the circumstances, a spouse may have to first obtain consent from the other spouse before binding the joint estate. Also, were a spouse to bind his or her separate estate through debt, then the creditor will have a claim to that. 

However, If the separate estate cannot cover the claim made by the creditor, then the creditor will have a claim against the joint estate. 

How does insolvency affect a community of property marriage?

If a spouse who is married in community of property is unable to pay his or her debts, it will have serious effects on the other spouse who will also be declared insolvent as a result of their joint estate. 

The joint estate could be lost were either spouse to have a court order against them.

Managing the joint estate and obtaining consent

The joint estate is managed equally by both spouses, but certain transactions require the consent of the other spouse. 

Situations where you don’t need the consent of your spouse include making deposits at a bank, making donations to a third party which will not prejudice the other spouse, starting a company or trust, making transactions on the stock exchange, entering into a contract as part of your business, selling your car, or performing transactions for work.

If needed, you will have to acquire the informal consent, written consent with or without two witnesses (depending on the situation) or prior written consent with two witnesses before undertaking certain acts. 

This is in line with the terms specified by the Matrimonial Property Act. 

When receiving money due to the other spouse such as inheritances, pension, income from his or her separate property, return on investments, or funds from an insurance policy then you will only need oral consent. 

Also when selling or pledging common household furniture or donating from the joint estate wherein the donation unreasonably prejudices the other spouse, oral consent will also be sufficient.

You will require written consent if you sell or pledge assets from the joint estate which are used for investment purposes such as stamps or Kruger Rands etc. 

Also, if you sell, pledge or give up an insurance policy, mortgage bond, fixed deposit, a share or stock or any other asset from a spouses investment at a financial institution or if you withdraw money from an account that in the other spouse's name you will need to have their written consent to do so.

If you plan to sell an immovable property which belongs to the joint estate, or if you enter into a credit agreement in terms of the National Credit Act 34 of 2005 or a contract to purchase an immovable property, then you will have to obtain written consent which is then signed by two other witnesses.

Sometimes the spouse will have to give their consent before a transaction and this cannot be changed later. 

Such instances include entering into contracts of surety where the joint estate is bound as surety for the debt of a third party, or selling or giving a third party a share in the immovable property. Two witnesses will also have to sign this consent agreement. 
 
If a spouse were to enter into a transaction which requires the consent of the other spouse, yet the consent was not obtained, then the rights of the third party who the spouse contracted with will be favoured. 

The transaction will be valid if said third party wasn’t made aware of or couldn’t possibly know whether or not consent had been given. The law also provides protection to the other spouse who consent was not asked of. 

When the joint estate is divided at the disposal of the marriage, then adjustments will be made and said spouse will be paid compensation. 

Can you sue your spouse for damages?

It would be pointless suing your spouse for damages if you are married in community of property. This is because money will be taken from the joint estate in order to pay for the damages and then they will go back into the joint estate.

However, you can sue your spouse for non-financial losses which could result from injuries caused by a car accident. This will be for pain and suffering and will be part of the spouses separate estate outside the joint estate. 

However, said spouse will not be able to sue the other for medical expenses as these count as a financial loss.

Changing your marital regime - Postnuptial contract

Many couples who are married in community of property may decide to change their matrimonial property regime later on. 

However, in order to do this the couple have to meet specific requirements and then jointly apply to the High Court in order to make amends to this regime.

The requirements that need to be met include the following:

  • There has to be a valid reason for the change to occur.
  • The Registrar of Deeds needs to be given notice of this intended change. This should be published in the Government Gazette and two local newspapers no later than two weeks before the date that the application will be heard. Notice must be given to all the known creditors via certified post. 
  • The draft of the notarial contract which the couples intend to register has to be annexed to their application.
  • The proposed change will cause no other person to be prejudiced.
  • As a means of formality, the creditors need to be given the right to refuse the change of the couples matrimonial property regime. These rights need to be preserved in the proposed contract.
  • The assets and liabilities of both parties needs to be laid out in detail in order for the court to establish whether or not there was sound reasons for them to wish for this change and if it will result in result in any person being prejudiced by the change. 
  • If either of the applicants have filed for bankruptcy in the past then this will need to be stated along with the circumstances, and then rehabilitation application will need to be provided. 
  • If the creditors of either party are seeking out legal action so as to recover payments outstanding on debts which are due then this should be stated. This is so if the debts outstanding are by either an individual or by the couple as a whole.
  • The domicile of the parties involved needs to be disclosed of in the application, and if not a resident then they should state where they are resident. The application must disclose where the parties are domiciled and, if they are not resident there when the application is made, where they are resident. If there. If there is a recent change in domicile or residence then this should be noted.
  • Once satisfied that the requirements have been met, the court will then order that the existing matrimonial property regime no longer apply to the marriage. They will then authorise the couple to enter into and antenuptial contract which will then regulate the matrimonial property regime from that point onwards. 

 
It is worth mentioning that such an application is not cheap, thus couples should exercise caution before marriage that their marital contract is the one which they prefer. 

This will help to avoid the pain of having to go through this process.

Van Deventers & Van Deventers Incorporated - Antenuptial Contracts

If you are married in community of property and wish to make a marital regime change then contact us.

If you aren't married as yet, it is prudent to consider the alternative to marriage in community of property, by looking at an antenuptial contract.
 

Comments are closed for this post, but if you have spotted an error or have additional info that you think should be in this post, feel free to contact us.


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