The near arrival of Spring – and wedding season – are likely to fill soon-to-be wed couples with excitement about their impending nuptials, and while it is undoubtedly good to plan the details of the celebration, it is also important for partners to pay equal attention to the details of their marriage contracts.
Jeremy Woods, Senior Consultant Fiduciary Services, at leading financial advisory firm GTC, urges individuals to carefully consider their needs and to review their contracts before signing.
“This has many consequences for your life together, and these may even continue after death has parted you,” he says.“It is entirely natural for couples to focus on making their wedding day as special as possible. However, it also is a reality that the majority of couples focus far too little attention on the less romantic aspects of determining an appropriate marriage contract to legally regulate the union.”
He continues: “While most couples commit in their wedding vows to stay true to each other until one of them dies, it is notable that a marriage contract may bind two people even after one of them has passed on. The legal structure of a marriage forms the basis of several material financial aspects of your life together, including life insurance, investment decisions and the estate you leave to your family.”
Tax and net investment values should not have a place in the proceedings of a wedding, but absolutely need to be planned for prior to this important day.
For the majority of couples, this decision is centred on whether to commit to an ante-nuptial contract, and whether to be married in- or out-of-community of property.
Marriages in-community-of property dictate that all the assets and liabilities of both parties – including those attained prior to the marriage – are aggregated in a single estate, with an equal share for each partner. This holds true in the event of the death of one party as well, regardless of whether separate wills have been drawn up.
Woods emphasises that whilst GTC is by no means advocating for couples entering into the union of marriage not to trust one another, it may be a prudent option for a modern couple to keep their assets separate. This allows for each partner to have greater independence over their assets and wealth accumulation. Woods further points out that this is more relevant now than ever before as more and more dual income couples are self-employed earners.
“The fact remains that many couples have considerably different priorities, perceived contributions and values in their approach to managing – and later dividing – their assets. In GTC’s experience with winding up estates, we have seen numerous examples of the more conservative surviving partner being left with a smaller than anticipated estate, following the death of a partner that has been less risk averse in managing the family’s assets,” he says.
There are also many cases of a deceased partner leaving their spouse with unanticipated debt. If the marriage was concluded without an ante-nuptial contract, the deceased’s creditors will lay claim to the surviving spouse’s assets, regardless of the fact that it was the deceased who was responsible for initiating the debt.”
According to Woods, there is a major misconception that ante-nuptial contracts are only worth considering if the couple has substantial assets prior to the marriage.
“In fact, a decision to get married out-of-community of property is as much about governing the future of a union as protecting past ownership. It is impossible to predict what may happen to either party in their future together, and it is best to be prepared for any scenario,” he says.
Woods cautions that ante-nuptial discussions – with the idea that each party retains their own assets in the event of a death – or a breakdown in the marriage – still makes for a sensitive topic with couples, particularly in the emotionally charged days ahead of a wedding.
In order to avoid delicate discussions about the legalities before a marriage, couples may opt for what is considered a ‘middle road’ option, to marry out-of-community of property with the accrual system. This determines that each partner retains their assets gained prior to the marriage and they each have a share in the joint asset growth obtained during the marriage.
“This option is especially popular for older couples who marry, or in the event of second marriages, when each partner has independently accumulated their own assets.
As divorces are becoming all the more commonplace in our society, Woods reminds divorced couples to amend their wills as soon as their marital union has been dissolved. According to a report released by Statistics South Africa published earlier this year, four in ten divorces in 2016 (the latest statistics available) were for marriages of less than ten years.
Woods explains: “If the existing will – whether it be joint or separate – before the divorce stated that the spouse was to inherit something, the law places a moratorium on that specific bequest for a period of three months. Should the testator or testatrix die within that three-month window, the bequest to the ex-spouse will be null and void. Should the testator or testatrix die after the three-month window, not having changed the will, the ex-spouse will inherit whatever the will directed.”
As one can imagine, forgetting to change the will may cause much heartache for the new spouse.
Woods concludes: “In our modern society with its many forms of unions and partnerships, marriage contracts – devoid of romance as they may appear at the time of embarking on a marriage – are becoming increasingly important, especially in the way they bind people even after death. The decision on which contract option is appropriate for each couple needs to be taken with care, due consideration and the guidance of an appropriately qualified professional, who ideally should have a personal relationship with the individuals.”
For more information, contact Jeremy: firstname.lastname@example.org