Ladies, let’s talk. While we might agree that there’s some progressive changes in the perceptions and lived realities of power dynamics in relationships today, when it comes to finances, we do experience some form of limitations. In most instances, it is the woman that’s more likely to give up financial control or risk their financial wellbeing for the sake of the household. Whether it’s leaving a job, or abandoning a side hustle to free up time to take care of the kids, or moving to a new city after getting married to start afresh – there are several reasons we can discuss, however, in the current tough economic climate we’re living in, it has never been more crucial to ensure that we are well-versed when it comes to the financial implications of our romantic unions, as well as being in the know with regards to the options we have when it comes to keeping the purse separate. 

So, let’s continue this conversation. 

If you missed the previous blog post, you can quickly catch up here.

Here’s part two of the conversation we had with Law Firm, Ulrich Roux and Associates on options women have available, to keep a tighter grip on their finances.

Q. Why is it important for women to fully understand the financial implications of how they are married and how their long-term partnership is structured?

With the rise of divorce cases in South Africa, the possibility of funds being withheld by spouses has become an issue with legal proceedings. The matrimonial property regime determines if a party is entitled to the preservation of their assets upon the dissolution of marriage. A system of being married out of community of property ensures that a woman will have financial security during her marriage due to her assets being protected from her spouses’ creditors.    

The importance of childcare and maintenance becomes crucial in the instance of divorce proceedings and maintenance claims (Rule 43 application). Women need to ensure that they are financially stable to support their dependants in the event of death or divorce. 

In the climate of gender-based violence in South Africa, it is vital to advocate for financial independency for women in the event that they are required to remove themselves out of volatile situations. 

Q. Can you take us through the legal consequences that may stem from your marriage contract and how they affect how your estate is structured, debt, tax obligations, etc?

One of the disadvantages of marriage in community of property is that if one partner becomes insolvent, everything in the joint estate will be attached and sold off to pay off any creditors, unless the other partner can prove that their property does not form part of the joint estate. Another disadvantage is that most transactions or contracts entered require the consent of the spouse. In the absence of consent, the law will favour the third party with whom the contract was made. 

The main income tax consequence of being married in community of property is that a person is taxed on half of their investment income, rental income, capital gains and half of your spouses’ income and capital gains. The income will be taxed in this way regardless of who the asset belongs to. 

A marriage out of community of property is each spouse being responsible for their own assets and debts. Thus, each spouse will be taxed separately on their own individual income and tax liability. Neither spouses will be affected by the debts or liabilities of the other as their assets will be protected from creditors of the other spouse. Lastly, neither spouse will be entitled to make a claim on any assets belonging to the other spouse and the court is not entitled to adjust this to create equality and fairness. 

Q. Is it possible to change your marriage contract? If so, what are the implications of changing your marriage contract on your finances?

In the event where a couple is married in community of property, an application must be made to High Court for one to change their matrimonial property regime to be in community of property in terms of section 21(1) of the Marriage Act. 

According to the decision of Lourens et Uxor 1986 (2) SA 291 (C), the following guidelines that the court should follow with granting a section 21(1) application: 

  1. There must be sound reasons for the proposed change.

According to South African Law, the parties who wish to become married out of community of property must enter an antenuptial contract prior to the marriage ceremony being concluded. If they fail to do so they are automatically married in community of property. Of course, many people are unaware of this provision and should be able to satisfy the court that it should change their matrimonial property system if it was their express intention that they intended to be married out of community of property.

  1. Sufficient notice of the proposed change must be given to all creditors of the spouses.

The Act requires that notice of the parties’ intention to change their matrimonial property regime must be given to the Registrar of Deeds, must be published in the Government Gazette and two local newspapers at least two weeks prior to the date on which the application will be heard, and must be given by certified post to all the known creditors of the spouses. Moreover, the draft Notarial Contract that the parties propose to register must be annexed to their application.

  1. The court must be satisfied that no other person will be prejudiced by the proposed change.

The court must be satisfied that the rights of creditors of the parties must be preserved in the proposed contract. The application must therefore contain sufficient information about the parties’ assets and liabilities to enable the court to ascertain whether or not there are sound reasons for the proposed change, and whether or not any particular person will be prejudiced by such change. Once the court is satisfied that the requirements have been met it may order that the existing matrimonial property system may no longer apply to their marriage and authorize the parties to enter into a Notarial Contract by which their future matrimonial property system is to be regulated on such conditions as the court may deem fit.

Q. In 2019, a new bill approved by Cabinet (Recognition of Customary Marriage Act) had important financial implications for women in customary marriages that were never there before. Can you take us through these?

The introduction of the bill in relation to Recognition of Customary Marriage Act served to tackle the issue of discrimination against women in polygamous customary marriages. 

Prior to the Act , Section 7(1) of the Act was drafted in a manner that wives in polygamous marriages had no right of ownership nor control over marital property and that it remained solely for the husbands. 

The constitutionality of the section was addressed in the Constitutional Court in Ramuhovhi and Others v President of the Republic of South Africa and Others [2017] ZACC 41 (the Ramuhovhi-case). The Constitutional Court held that section 7(1) of the Act was inconsistent with the Constitution as it unfairly discriminated against women in polygamous marriages entered before the commencement of the Act on the basis of gender, race and ethnic or social origin.

The interim relief is that a husband and wives must now share equally in the right of property and other rights attaching to family property, including right of management and control of the family property. 

Q. Another factor we never want to face is the possibility of divorce. Divorce has its own financial battles and if women do not have their ducks in a row, they could lose what they have built over the years in the marriage. What financial admin should women always have in check in case of this unfortunate eventuality?

In the event where a divorce may arise, women should be mindful of the division of assets and the potential issue where their spouse intentionally conceals their money and assets prior to the finalisation of the divorce. 

Women’s assets may consist of the matrimonial home, financial investments, bank accounts, business, saving shares and much more.

The objective for a person to conceal their assets in a divorce is to prevent their declaration of assets, for the depreciation of assets, to overstate debts to announce insolvency, to document revenue to be less than what is really is and to claim expenditures to be greater than what they truly are. 

The following tactics are commonly seen in the process of concealing assets during a divorce: 

  1. Concealing unrecorded cash;
  2. Moving ownership of assets to friends and family;
  3. Manipulation of accounting books of a business to reflect incorrect revenue and expenditure; and
  4. Opening of several personal or business bank accounts to shift funds.

In the event of a divorce, a woman can pick up the signs of concealed assets as follows: 

  1. One should conduct an assessment of the standard of living during marriage and after the irretrievable breakdown of marriage to determine abnormal financial activity conducted by the spouse;
  2. Review all living expenses and link them with all known sources of income, assets and loans; and
  3. Compare them with current sources of income, assets and loans declared by the spouse. Any discrepancies revealed would be a sign of concealed income or assets.
  4. Your matrimonial property regime affects how your assets will be dealt with after your death and therefore needs to be taken into account when planning your affairs.

Q. There’s also the eventuality of death. How can women legally protect their assets in this tragic scenario, within the context of a prearranged separate purse?

If a woman is married in community of property, the joint estate will be dissolved in the event of death and the surviving spouse will have a claim of 50% of the value of the net joint estate. The surviving spouse’s share of the joint estate does not constitute an inheritance and no inheritance tax to be paid. The other 50% of the net estate will be bequeathed to heirs and legatees. 

If a woman is married out of community of property with the accrual, the accrual contract comes into effect from the date of death. The executor of her estate will determine if there were any assets excluded from the estate to which the accrual applies. Thereafter, the increase of the real value of woman’s estate will be added up and divided by two. The surviving spouse will then have an accrual claim against the deceased where his estate exceeds hers. However, if the estate is less than that of the surviving spouse, the deceased estate will have a claim against the surviving spouse for their share. 

There are a few ways in which women can protect their assets in the event of death:

  1. A will: Estate planning is crucial in the distribution of assets upon the date of death of a person. The creation of a trust, donation or bequests can included in the drafting of the will to prevent intestacy , as well as to be intentional about the distribution of your assets to your heirs and legatees. The establishment of a valid will ensure that estate duty liability is reduced, an efficient executor is nominated and provisions are made for one’s surviving spouse or minor children.
  2. Bequests: A person can choose to leave their entire estate or a particular item or cash amount to someone else (legatee) through means of a special bequest. After an executor has paid estate administration and credits, the residue of that asset will be awarded to the legatee. 
  3. Trust: Trusts can be used to protect assets intended for loved ones from credits and tax liability. A testamentary trust can be used to protect the assets bequeathed to a spouse or children and the use of an inter vivos trust can be used to effect the transfer or growth of assets in property.
  4. Life insurance: Life insurance policies can be used to create liquidity in one’s estate with the effect of creating financial stability for their spouse or children. However, the value of the policy will be taken into account when the calculation of estate duty has occurred.
  5. Living annuities: Living annuities do not form part of the deceased estate and will be useful in the passing invested capital onto beneficiaries. The transfer of the living annuity will occur without attracting estate duty or executor fees. If a beneficiary is not nominated, the annuity will be paid into your deceased estate.

Wrapping Up

It’s always better to have your ducks in a row, rather than learning the hard way, when it’s too late. Life is unpredictable. Equipping ourselves with the necessary knowledge that will move you forward financially, has a domino effect in your holistic wellbeing. Just like the late American Author and US Ambassador, Clare Booth Luce once said, “a woman’s best protection is a little money of her own.”

Go forth and prosper!