Many couples, unaware of the financial implications of a community of property marriage, elect to get married without an ante-nuptial contract. It is often only during the course of the marriage that couples become aware of the shortcomings of a community of property marriage, although, thankfully, our law makes provision for couples to alter their marriage contracts after the date of marriage. The process, though, can be cumbersome and costly.
That said, it is important for couples married in community of property to be aware of the option available to amend their marriage contract after the fact should the need arise.
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Here, we explore the process of changing one’s marriage contract and the implications for one’s financial future.
If you are currently married in community of property, you are no doubt aware that you and your spouse did not sign an ante-nuptial contract before getting married. This means that you and your partner jointly own a common estate in equal, undivided shares where all your assets (subject to a few exceptions) and liabilities, acquired both prior to the marriage and during the subsistence of the marriage, form a single, joint estate.
Marriage in community of property is a deeply flawed system, especially when it comes to debt, insolvency and divorce and couples recognising these shortcomings can opt to change their marriage contract in accordance with the procedures set out in Section 21(1) of the Matrimonial Property Act.
In terms of this legislation, a couple is able to make an application to the high court for leave to sign a notarial contract, which, after the postnuptial contract has been registered at the Deeds Office, will have the effect of an ante-nuptial contract that will regulate the new matrimonial property regime.
In pursuing such an application, it is important to note that both spouses must bring the application and must consent to having their marriage contract amended. This means that one spouse cannot bring such an application without the other spouse’s consent and that the postnuptial contract must be signed by both spouses.
When making an application to the courts, you and your spouse will need to set out sufficient reasons for making the change. Further, you will need to satisfy the court that neither of you is insolvent nor has any judgment against you. In addition, the court must be satisfied that no other person will be prejudiced by the change in contract.
Remember, a change to your marriage contract affects the rights of creditors in respect of debt and/or insolvency, and the courts will need to ensure that your creditors’ rights are protected – keeping in mind that, as mentioned above, in a community of property marriage, you and your spouse are jointly liable for each other’s debts, including the debt that you each incurred before marriage. Also, because you share a joint estate, bear in mind that your spouse has the capacity to bind the joint estate through their actions.
While you are married in community of property, you and your spouse remain jointly and severally liable for all debts in the estate, and creditors can pursue the joint estate to recover what is owed to them. If you change your contract to an out-of-community marriage, this will no longer be the case.
To ensure that your creditors are notified of your intention to amend your marriage contract, you will be required to publish a notice to creditors in two local newspapers (one English and one Afrikaans) as well as in a government gazette, and these notices must be published at least 14 days before your application is set to be heard. You will also need to send notices to your respective creditors via registered mail. Because of this requirement, the process can take up to three months to complete.
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In preparing for the high court application, you and your spouse will need to prepare certified copies of your ID documents, marriage certificate, proof of address, and income tax numbers. You will also need to provide information pertaining to your minor children, assets and liabilities, employment, and a full list of all existing creditors.
As this process requires an application to the high court, be aware that it can cost between R15 000 and R30 000 in legal fees, depending on the complexity of the matter, keeping in mind that when drawing up your postnuptial contract, you and your spouse will need to agree on a division of assets. For instance, if you and your spouse own fixed property, you will need to have the title deeds of the property endorsed in terms of Section 45bis.
Further, it is important that both you and your spouse fully understand what it means to be married out-of-community of property and how it will affect your finances going forward, especially if your marriage were to dissolve due to death or divorce. In an out of community of property marriage, you and your spouse each have separate estates, and it will therefore be necessary for each of you to have an estate plan prepared accordingly. Further, you will need to update your wills on account of your new marital regime.
While you were married in community of property, 50% of the joint estate was yours to bequeath as you see fit. Now that your estates are separate, you are free to bequeath 100% of all assets registered in your name, although keep in mind that your spouse may have an accrual claim against your estate in the event of death or divorce to the extent that your share of the accrual exceeds theirs.
Also worth noting is that, in an out-of-community marriage, any debt incurred by you is separate from that of your spouse and vice versa and, as such, you are each responsible for maintaining your own credit records.
Although you will now have separate as opposed to joint estates, it is still possible to have a joint financial plan and, in fact, this is advisable. Your financial advisor should be in a position to amend your financial plan, including your estate plan, in line with your new marital contract.