Dominique Brinkmann
01 May 2022
OPINION
SUBJECT: Marriage regimes and your assets
Main Concerns:
If you were married after November 1984 with an ante-nuptial contract (ANC) the ability of a spouse to seek a redistribution of assets if you are married out of community of property, without the application of the accrual system, fell away. However, a recent judgment in the High Court of Pretoria has significantly changed this.
What could this judgment potentially mean for you if you are married out of community of property “out and out” and you are thinking of getting divorced. How can you effectively plan to prevent this.
It is important to note this judgement was unopposed and is a question of law, the High Court has requested that the Constitutional court review the judgment.
The law:
To date there are three kinds of matrimonial property regimes one can enter into. These three include in-community of property, out of community of property and out of community of property with the application of accrual. If you are married in community of property, simply, you and your spouse share all assets and liabilities, profits, and loss. Therefore, at divorce or death of a spouse the estate will be split in half regardless of circumstances. If you are married out of community of property then each spouse retains their own assets and upon divorce or the death of a spouse the only assets which are split or retained, as the case may be, are those which were purchased jointly by the spouses. Therefore, a spouse has no claim over the other spouses assets, if you were married after November 1984. The third regime is to be married out of community of property but with the application of the accrual system. This means that upon divorce or the death of a spouse an accrual calculation takes place between the two estates of the spouse and the difference between the estates is split between the spouses. The accrual system has only been effective since November 1984 prior to this if spouses got married out of community of property there was no “sharing” of assets between spouses once the marriage ends either by way of death or divorce.
Prior to November 1984 however spouses could use section 7(3)i of the Divorce Act of 1979 (“the Divorce Act”) in the event that a spouse who feels they are entitled to some of the assets of their spouse, even though they are married out of community of property, can apply to the courts for a redistribution of assets. This would have been done by the concerned spouse approaching the Courts and requesting a redistribution of assets under section 7(3) of the Divorce Act. This is a discretionary power granted to courts in a divorce proceeding and the onus would be on the spouse to prove that the assets ought to be redistributed. The spouse applying for the redistribution would need to show the Court that they contributed directly or indirectly to the maintenance of the other spouse during the subsistence of the marriage. The purpose of Section 7(3) was to avoid grossly inequitable discrepancies in the financial position of spouses at divorce. This discrepancy most often is when one looks at the pension fund or retirement funds of a spouse.
Since November 1984 however this has changed and if you were married after this date Section 7(3) was no longer an available relief for spouses as the accrual system was introduced to help spouses to grow and share their estate equally. A recent judgment handed down by the High Court of Pretoria has changed this.
The court declared that section 7(3) of the Divorce Act is inconsistent with the Constitution of the Republic of South African and therefore needs to be amended. This therefore means that spouses who are seeking a divorce and who feel that they have contributed directly or indirectly to the maintenance of the other spouse during the subsistence of the marriage for specific reasons which would be unique to each case. Therefore, when you are divorcing your spouse, they can request to the court that they ought to receive certain of your assets and this includes pension funds and investments.
I did not go into great detail regarding the judgment however if you wish to read it please click here to read the full judgment. I have only highlighted the outcome of the case.
The Opinion
There are various options available between spouses to equalise assets if they are married out of community of property without the application of the accrual system. These options however are all subjective and at the discretion of the spouses.
Many spouses choose to donate assets to each other if the one spouse has earned or accumulated more assets during a certain period of time. This exercise assists in ensuring that the spouse who is earning less can also benefit from the other spouses’ fortunes for whatsoever reason. Another option would be to contribute to and investment or retirement annuity on behalf of the spouse who is not earning as much as the other spouse. There can also be tax advantages to these decisions.
If you are unsure of the implications of this change in law, please consult with your advisor to determine how best to plan for the future.
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