Mc Naught & Co
Division of Assets in Divorce
Who gets what? is the question that we get asked most when sitting down with clients to negotiate and finalise divorce settlement agreements.
Whilst an uncontested divorce where the parties are able to agree on the proprietary consequences (division of assets) gives room to cater to what best suits each couple in their circumstances, the law determines the basic rights and entitlement of each party as regards assets and liabilities in the case of divorce should no settlement be reached.
Whilst the finite detail of the various marital property systems is a bit too complicated for this article, I will cover the basics of each system and how it applies to assets and liabilities in a marriage should the parties take the unfortunate step of divorce.
There are three marital property systems in South Africa and these are, in community of property, out of community of property with the application of the accrual system and out of community of property with the exclusion of the accrual system.
In community of property is the system which needs absolutely no work to apply to one’s marriage in that should you simply get married without taking any steps to govern your marital property regime, you will be married in community of property. This system essentially applies to all assets and liabilities in the marriage, both those accrued and incurred prior to date of marriage as well as after date of marriage and whether accrued to or incurred by either spouse or both jointly.
If married in community of property, absolutely everything is shared in that each spouse becomes entitled to half the value of every single asset that either or both own, regardless of when the asset was accrued and each spouse becomes liable for half the debt / liabilities of the other, regardless of when such liabilities were incurred. For this reason, getting married in community of property is not only extremely risky in that it can have unplanned and unforeseen consequences in marriage, but it can also have absolutely devastating consequences in divorce.
Out of community of property with the exclusion of the accrual system is the original and oldest form of getting married out of community of property or by way of an ante-nuptial contract (“ANC”). Under this marital property system, ALL individual liabilities of each spouse remain their own responsibility, I.e you do not automatically become liable for debts of your spouse due to the marriage, and, ALL individually owned assets, whether acquired before or after the date of marriage also remain that of the party who owns them, again, regardless of when acquired. When a couple gets married out of community of property excluding accrual, nothing is shared between them by operation of law and if they wish to share an asset, for example a family home, they need to take a deliberate step of registering the asset in the parties joint names.
Out of community of property including accrual is the most complicated form of marital property control in South Africa. As regards liabilities or debts of the parties, this system is exactly the same as if accrual were excluded insofar as neither party becomes liable for debts of the other by virtue of the marriage.
A broad outline (Changes and exclusions may apply) however of the rights and entitlements as regards assets of the parties under this system is as follows:
The total value of assets with which a party comes into a marriage with remains with such party in the event of a divorce, but the value of assets accrued by the two parties in their individual names (subject to anything which may be expressly excluded or varied in an ante-nuptial contract) after date of marriage is essentially shared. In order to best explain this, I will give one short example.
Party A comes into a marriage with an asset value of R500 000.00 (Five Hundred Thousand Rand) and Party B comes into the marriage with an asset value of R300 000.00 (Three Hundred Thousand Rand). On dissolution of the marriage / divorce, Party A has an asset value of R1 000 000.00 (One Million Rand) and Party B of R500 000.00 (Five Hundred Thousand Rand). Therefore Party A is worth R500 000.00 more than when the parties got married and Party B is worth R200 000.00 more. In the event of a divorce, Party A would have to give to Party B, the sum of R150 000.00 being the difference in the accruals between the two parties estates.
Let us use the same commencement values for the second example, except on dissolution of the marriage, Party A is still worth R500 000.00 but Party B is now with R1 000 000.00. In this case, Party A has shown no accrual in asset value, but Party B has an accrual of R700 000.00. Here, Party B would need to give the sum of R350 000.00 (being half the accrual value of Party B’s estate) to Party A so that the parties essentially again jointly shared in the increase of asset value during the marriage.
Estate planning through control of your marital property system is important and for that reason, I encourage that a notary public for a property drafted ante-nuptial contract should be a vital stop for all parties about to get married. Should you however find yourself in the unplanned and undesirable situation of a pending divorce, discussing the basic rights and entitlements of each marital property system with your divorce attorney can best place you in a position to be able to conclude a settlement to the divorce instead of having many difficult months fighting in court.
Our offices have three admitted and experienced notaries to assist you with planning and execution of your ante-nuptial contract before getting married and should things have unfortunately “gone south” and you find yourself in the situation of a divorce, we can mediate a settlement between the parties to make that most difficult and unfortunate experience as least painful and as expedient as possible.