Understanding how your marriage contract will impact the management of your family’s finances is essential to a happy marriage and a secure financial future…
If you get married without drawing up an ante-nuptial contract, you will automatically be regarded as being married in community of property because this is the default contract in South Africa. While you may save some money by not paying a lawyer to draw up an ante-nuptial contract, a marriage in community of property carries significant financial implications for the couple.
In community of property
When you are married in community of property, you and your spouse’s share the risks and the benefits of a joint estate.
No asset can physically be divided and you and your spouse will share equally in the profits and losses regardless of your financial contribution. A joint estate together is only divisible upon termination of the marriage. In other words, all debt accumulated both before and during the marriage forms part of the joint estate.
Hans Overbeek, CEO and founder of Cyber Finance, a debt management company operating out of Century City, Cape Town explains: “When you are married in community of property it literally means you are not only married to your partner only but also to their finances.”
What does this mean for your finances?
When you are married in community of property, certain transactions will require the consent of your spouse, while others will not.
For example, starting a company, trading shares, or selling movable assets do not require consent from your spouse. However, buying property, applying for a home loan or credit will.
One of the biggest disadvantages to couples who are married in community of property is that you are responsible for all debt incurred by your partner – this includes debt that was incurred before your marriage. All contractual debt, such as personal loans, credit card debt, and even maintenance and child support from a previous marriage, is also included.
The implication for couples married in community of property is there is no safety net of having separate estates to safeguard the family’s finances. If one of you is declared insolvent or creditors come after your partner for a debt, you will both be liable for the outstanding debts. Furthermore, if your partner does not have money to pay the debt, you can be held responsible for the full debt, not only 50%.
How you can regain financial control as marriage partners
Couples who manage their finances together stay together, or at least that is the case for those married in community of property.
“If you and your partner find yourselves under a mountain of debt there is no point in playing the blame game. You need to be supportive of one another and find a solution that will benefit the family’s finances and create healthy financial habits going forward,” Overbeek explains.
“At Cyber Finance, we frequently find that one partner will contact us about debt counselling in an attempt to get their debts under control but because they are married in community of property and the partner is hesitant about seeking help, they decide to forgo the help.
“Invariably they visit us again but by then their finances have become a lot worse. If they had signed up for assistance earlier, they could have avoided much of their financial losses,” he says.
To embark on debt counselling, both partners in a community of property marriage must agree to and enter debt counselling together. It is important to note that if only one spouse signs up for the process the process is not legally valid as they share a joint estate.
Couples can reduce the inevitable personal stresses between them if they manage their finances together and institute healthy financial habits from the start of their marriage. But even the best laid plans can fail and if your family finds itself in a precarious financial situation, take action sooner rather than later and seek help from a debt counsellor as a couple to regain a healthy financial situation for your family.