Future financial status – the less romantic side of getting married
Categories: Financial wellness
Tags: Financial education, Financial Literacy, Financial Tips, Marriage, Weddings
The biggest favour you can do for your marriage and future happiness and financial wellbeing, is proper, upfront financial planning that includes the right marriage contract for your situation.
COP, ANC…the alphabet soup that is marriage contracts is enough to spoil your appetite. It is probably why so many of us don’t pay much attention to marriage contracts – until death or divorce cross our paths.
Why is a marriage contract necessary?
Without a contract, South African law assumed that two people are married in community of property. This means, in simple terms, what yours is mine and what mine is yours. It might sound romantic and perfect for your perfect relationship, but here are the practical implications:
- Neither of you can enter into a contract without written approval from the other person. Yes, it means that to get a credit card, buy or sell a car, or start a business you need your spouse’s signature, even if you use all your own money for the transaction.
- If one of you becomes insolvent, the other person is automatically insolvent too. The creditors can come after anything and everything the two of you own, even the furniture you inherited from your grandparents – because when you got married, it became both of yours.
- Speaking of inheriting: anything you inherit or receive as a gift or a donation, becomes joint property, unless the person giving it to you, specifically states otherwise.
- Should you get divorced, everything you own gets split down the middle – half for each of you. This can be fair, especially if one of you stayed at home and raised the children while the other one earned the money that bought your joint assets. In other circumstances, such a 50/50 split can be extremely unfair.
Types of marriage contracts
South African law recognises two types of marriage contracts. However, for them to apply and save you from financial stress, you have to sign the contract BEFORE you get married.
- Marriage out of community of property, or what is mine is mine and what is yours is yours. The implications of this arrangement are:
- Each of you keeps your own assets and liabilities and does not share in each other’s profits or losses.
- You can both enter into contracts on your own and one will not be held liable for the other’s debts. Your debt plan is your business entirely.
- If one of you becomes insolvent, the other person’s assets and possessions cannot be touched.
- Any inheritance, gifts, or donations belong only to the person who received it.
- If the marriage ends, each of you retains your own estate. Nothing is shared unless you decide to do so.
- Out of community of property (with the accrual system) is exactly the same as out of community of property, except that it brings the assets you gather and grow during your marriage, into play. This means that the assets you have built up during the marriage will be divided if you split up. What you owned before the wedding will still be yours, but what you built up together, will be shared equally. The important thing is to include in the contract the assets and their value that each of you brings into the marriage so that it can be subtracted from the final value of your joint assets.
What about customary, or traditional, marriages?
The Recognition of Customary Marriages Act sets out the conditions under which our law recognises a traditional marriage, namely:
- The marriage must have been concluded in accordance with the customary laws of one of South Africa’s ethnic groups. You cannot make up your own customs, and you cannot have a legal customary marriage unless at least one of you belongs to the group whose customs you have adopted for your wedding.
- Both of you must be older than 18 and both of you must have agreed to the customary marriage.
- The marriage must be negotiated, entered into, and celebrated in accordance with customary law.
- The law recognises polygamy (a man having more than one wife at the same time) only if it is part of the South African traditional culture of at least one of the people in the customary marriage. Women may not have more than one husband, because it is not a custom in South Africa.
- Before a man can take another wife, he must first reach an agreement with his existing wife or wives with regard to their property. This agreement must be made an order of court and registered in the deeds office.
Islamic and Hindu marriages
For various reasons, South African law regards Islamic and Hindu marriages as religious, not civil, unions, and therefore the marriage partners do not have access to the provisions of the Marriage Act or the Civil Union Act to resolve disputes.
There is, however, a solution. After the religious ceremony, a Hindu or Islamic marriage can be registered at the Department of Home Affairs in terms of the Marriage Act or the Civil Union Act. At that time, and before the marriage is registered, the parties can also sign a marriage contract. If they don’t, the law will see them as married in community of property.
A marriage contract doesn’t have to be a big, complicated document. It simply has to set out how you wish to be married in terms of the options available to you. It really is a valuable piece of financial planning and an investment in the future health of your financial status.
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