You're Getting Married - Let's Talk the Business Side!

The Weekender / Business Day 8/9 April 2006

The paramount issue for partners getting married may be whether they have found the right person. As finding Mr. or Ms. Perfect is often more complex than the functioning of the stock markets, we will proceed on the assumption that Mr. or Ms. Perfect has in fact been found!

The first issue to consider when getting married apart – from the date, dress and venue – is to decide on the matrimonial property regime. In South African law couples may be married under 3 types of contract:

• in community of property.
• out of community of property (subject to the accrual system).
• out of community of property (not subject to the accrual system).

There is a graphic of this 'getting married' discussion at the bottom of the page...

If no antenuptial contract is entered into, a marriage will automatically be in community of property.

The assets of both spouses will be joined into one common estate and each spouse will have a claim to half the estate. Certain assets are automatically excluded from common estate, for example, gifts and inheritances which are received on condition that they are excluded from the common estate. It should also be noted that consent from the other spouse may be required to enter into certain contracts.

On the termination of the marriage (due to death or divorce), the common estate is shared equally between the spouses. This is irrespective of the contribution of each spouse during the subsistence of the marriage.

Where marriages are entered into out of community of property after 1 November 1984, the accrual system will automatically apply.

Under the accrual system each spouse will continue to conduct their own estate independently of the other.

However, upon death or divorce the spouse showing the smaller accrual or growth since the beginning of the marriage will have the right to claim against the other spouse half of the difference in accrual of the estates of the spouses.

The reasoning behind the accrual system is that each spouse should share in the growth which was achieved during the marriage.

For example, if Mr. and Ms. Perfect were married in community of property their estates were worth R100,000 and R200,000 respectively, their total assets would be equal to R300,000 at the inception of the marriage.

If at the dissolution of the marriage the common estate is worth R600,000 each spouse would be entitled to R300,000.

If Mr. and Ms. Perfect were married out of community of property subject to the accrual system and Mr. and Ms. Perfect’s estates were worth R200,000 and R400,000 respectively, their total assets would be equal to R600,000 at the inception of the marriage.

Assume that Mr. and Ms. Perfect’s estate during the subsistence of the marriage grew to R500,000 and R600,000 respectively. At the dissolution of the marriage the total accrual is R500,000. Both parties have the right to a half-share of the accrual, which is R250,000.

In the event that there was no accrual system applicable to the marriage, each person will only be entitled to R500,000 and R400,000 respectively.

The second issue before getting married is that the engaged couple draw up a will or review their existing will.

It’s a good time for the parents to do so too.

Even if the engaged couple do not yet have children, it is always a good idea to have a clause providing for children. One should use a good attorney to draft a will as it is a complex area.

The third issue to consider when getting married is whether it would be appropriate to change the beneficiary on existing investments and policies, such as endowments, life insurance, unit trusts and retirement annuities.

You should also consider changing the beneficiary of your pension and provident fund. It is advisable that a summary of your portfolio is prepared and each contract is assessed with your financial planner and the relevant changes are made.

Getting married is way more than just the ceremony. Considering many divorces occur as a result of financial issues, it is critical that the un-romantic issues are discussed before the wedding arrangements with an independent qualified financial planner who has the CFP® accreditation and a lawyer specializing in matrimonial law.

Your financial and legal professionals need to understand the parents as well as the engaged couple and their joint aspirations.

My advice is to engage an independent fee-based certified financial planner who is focused on your best interests, and who can provide impartial advice and take the emotion out of investing. Visit www.fpi.co.za to select a qualified Certified Financial Planner®.

Debbie Netto-Jonker, CFP®, is founder of Netto Financial Services and was Financial Planner of the Year in 2001.
Her business partner Ian Beere, CA(SA) CFP® was the financial planner of the year in 2007.

Wouldn't you love to stumble upon a secret library of financial planning advice?
Find simple, down-to-earth advice on common financial and investment questions in South Africa.
Head down to our website today and judge for yourself.