Since I work in the property industry and run Quality Growth International, I have had the privilege of viewing people’s credit reports when onboarding tenants, and this has made me realise that many people do not know the financial impact of getting married in or out of community of property. I’ve also seen many shun people who dare start that conversation.
Growing up, just like many people I know, I had the mindset that getting married out of community of property was just wrong. I thought “why get married if you will keep your financial lives separate?”. Of course, this mindset was mostly rooted in ignorance, but with some exposure to the right people, and a bit of education on my side, my mindset was changed before I got married – thankfully. In so saying, I would like to share with you some of my thoughts on this topic.
1.In Community of Property
In South Africa, where I reside, if you get married without an Ante Nuptial Agreement (or Prenuptial Agreement) you will automatically be married in community of property.
So, what does this mean?
- It means you and your spouse are one in almost all aspects of the law. Your creditors are now your spouse’s creditors. You and your spouse now share debts, and you also share all your assets and liabilities – you are one.
- You cannot purchase anything substantial (on credit) without the approval of your spouse. Your spouse must co-sign every loan you make, and almost every business deal you do.
- If your spouse gets blacklisted, you are blacklisted too – even if the debts were made before you got married.
- If someone sues your spouse, and gets nothing, then they can come for you too.
- Should you dissolve the marriage; in most cases your spouse will be entitled to half of your assets or liabilities, including your pension fund.
In my opinion, although there is no one size fits all, getting married in community of property makes your family very vulnerable should things not go as expected financially. Although many religious people have been brainwashed to think it is part of the Holy Grail of marriage, it really isn’t, and it may be unwise to choose this type of set up if you know that there are other options. So, what are those options?
2.Out-of-Community of Property with Accrual
In this type of marriage, you and your spouse are viewed separately in the eyes of the law. Your spouse is his/her own man/woman financially, and likewise. Before getting, you and your spouse will enter into an agreement detailing the way you would like your marriage to run. You will often state all the assets you accumulated or inherited before you met your spouse and both of you will decide if those are assets will form part of the marriage or not.
So, what does it mean to be married Out of Community of Property with Accrual?
- Whatever you accumulated before you got married can be excluded from the marriage if you so wish.
- Anything you accumulate from the date of marriage belongs to both you and your spouse, sometimes even if one person worked for it.
- Your debts are considered yours alone, and your spouse does not have to co-sign any loans and except you both decide to do so, then you don’t have to do the same either.
- You will not inherit your spouse’s historical debts her/she made before they met you.
- You can buy property, vehicles, businesses, without the approval of your spouse since you and your spouse are viewed exclusively by the law. This means at times, as a family, you can buy two properties or more at a time since you have two separate financial profiles to use to your advantage.
- Should you and your spouse get into some financial difficulty, and your home is registered in the other spouse’s name, then your creditors cannot attach the home since it legally does not belong to you – although technically it does since you are Married Out of Community of Property, but with Accrual.
- You can legally “loan” money to your spouse, which means you can write it off as unpaid debt, when doing your taxes – you will have to get advice from a tax adviser.
- You can decide that some of your work during marriage, royalties, shares, books sales, unexpected inheritance or lottery winnings (most unlikely) etc do or do not form part of the marriage, it is entirely up to the both of you.
Look, there are many other benefits of getting married Out of Community of Property with Accrual, you will have to do some more research to get more benefits – but just don’t blindly get married in community of property – it’s a trap.
3.Out of Community of Property Without Accrual
In simple terms, this means; what’s yours is yours and what’s your spouse’s is your spouse’s, and the only thing that binds you together is your marriage. Here anything your spouse accumulated prior to marriage, and anything they accumulate during marriage is theirs and theirs alone. If your spouse bought the house and you bought the furniture, then the furniture is yours and the house is your spouse’s.
So, this means:
- Should the marriage be dissolved, you could walk away with absolutely nothing, or with everything you worked for.
- Your spouse’s creditors cannot come for you.
- You and your spouse are considered two separate individuals.
- Your credit reports are not linked.
- In a nutshell, getting married Out of Community of Property Without Accrual is similar in many ways to being married with the Accrual system, except the fact that what’s yours is yours and what’s your spouse’s is your spouse’s.
Which one do I advocate for? Look, we all have different preferences, and for me, the best of the 3 ways of getting married is number 2: Getting Married Out of Community of Property With Accrual.
I wish you success.
CEO, Quality Growth International