Registered antenuptial contracts vs agreements between spouses
The term ‘antenuptial contract’ can refer to either an informal contract or a contract complying with the formalities required by s 87 of the Deeds Registries Act 47 of 1937. The public is not always aware of the fact that a verbal or written contract can be binding inter partes (between the parties) because an antenuptial contract (“ANC”) is usually understood to mean a contract registered at the deeds office which regulates the matrimonial property between the parties and against third parties. This article briefly explores the above two concepts and case law dealing with the issues that arise when parties have both entered into a registered contract and a verbal or written agreement before or after marriage. In terms of the Deeds Registries Act 47 of 1937 (“the Act”), an antenuptial contract executed in South Africa shall be attested by a notary and shall be registered in the deeds registry within three months after the date of its execution or within such extended period as the court may on application allow. In the case of Ex Parte Minister of Native Affairs in re Molefe v Molefe 1946 AD 315, it was held that under common law, parties may mutually regulate their proprietary rights post-marriage through agreement, which holds binding force between them but does not extend to third parties. In B v B 820/2021 SCA the matter was heard on appeal from the Gauteng High Court. The Supreme Court of Appeal had to adjudicate on the validity of a separate agreement entered into by the parties after concluding a registered ANC, which excluded community of property and the accrual. The defendant in the main action claimed the enforcement of the separate agreement in her counterclaim. The separate agreement, among other things, included the payment of life-long maintenance to the wife on the death of the husband or by divorce. The court found that the separate agreement was indeed enforceable. The court’s reasoning in the above matter was that the ANC determines the matrimonial property regime and its effect on third parties, and the separate agreement does not attempt to change the marital regime. The agreement is valid and enforceable, and the court should uphold the principle of pacta sunt servanda (agreements must be kept). The agreement does not restrict the court’s discretion under the Divorce Act in terms of s 7(1) and s 7(2). The ANC and the separate agreement can coexist as long as they don’t contradict each other. When parties intend to change the matrimonial property system, an application should be made by both spouses in terms of Section 21 (1) of the Matrimonial Property Act and such change can only be effected by leave of the court. The court will grant leave if there are sound reasons for the proposed change, sufficient notice was given to any creditors of the parties, and no other person will be prejudiced by the proposed change. In Odendaal v Odendaal 2002 (1) SA 763 (W) the Court accepted the husband’s evidence that there was a verbal antenuptial agreement in terms of which they were married out of community of property, with the exclusion of the accrual system. Section 88 of the Deeds Registries Act further deals with postnuptial executions of antenuptial agreements and reads that a court may, subject to such conditions as it may deem desirable, authorise the execution of the notarial contract entered into after marriage but if the terms thereof were agreed upon between the intended spouses before the marriage was concluded. For an antenuptial contract to be valid and enforceable, it does not need to be registered. The effect of registering an antenuptial contract is that it gives notice to third parties on how matrimonial property must be dealt with and the necessary formalities that need to be complied with for obligations to be effective or valid against third parties. Therefore, contracts that have been entered into between spouses before marriage, whether it is verbal or written, will be valid between the spouses and will be enforceable. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes. Powered by SucceedGroup
Tax implications for marriages in community of property
The default marriage regime has some complicated tax consequences. When couples are caught up in wedding and honeymoon planning, visiting their attorney often takes a backseat. Many couples don’t realise that different marital laws affect how their assets are managed during marriage, divided if it ends, and how they’re taxed. The different legal frameworks determine if a marriage has a community of property between the partners. This idea dates back to when a married couple’s belongings were combined into one estate, usually managed by the husband. The concept of marital power was removed in 1984 through the declaration of the Matrimonial Property Act, and various other pieces of legislation have since been enacted to recognise same-sex unions and marriages according to traditional and/or religious rights. However, while a couple has the option of entering into a legal agreement aimed at keeping their respective estates separate, known as an antenuptial contract or ANC, in most cases—in the absence of such a contract—the default marriage regime is that of community of property. The focus of this article is therefore on the tax aspects that affect marriages in community of property. When a couple is contemplating marriage, often the last thing that they want to consider is that their marriage might end. However, the harsh reality is that all marriages do come to an end at some point—whether by divorce, annulment, or the death of one of the partners. COP marriages and your tax return SARS made some updates to the 2023 personal income tax return. While most reporting requirements stay the same, the way SARS verifies the information is what’s drawing the most attention. When filling out your tax return’s personal details, there’s a drop-down box to choose your marital status: unmarried (including single, divorced, or widowed), married outside of community of property, or married in community of property. If you are married in community of property, a separate section for spouse details is opened, in which SARS requires your spouse’s initials and their ID number. However, providing these details is more than a simple box-ticking exercise. These include investment income (interest and dividends, both local and foreign), rental income, and capital gains and losses. If you’re married in community of property, you’re taxed on half of your own and half of your spouse’s interest, dividends, rental income, and capital gains. How SARS deals with COP marriages Over the past few years, SARS has moved towards greater reliance on third-party data to pre-populate personal tax returns. As of the 2022/23 tax year, returns are now pre-populated with employment income (IRP5 / IT3(a) certificates), investment income, medical scheme information, and retirement annuity fund contributions. If you have previously submitted a return in which you have indicated that you are married in community of property, and SARS has confirmed a match with the information held by the Department of Home Affairs, any investment income data that has been uploaded to SARS will automatically appear on both yours and your spouse’s tax returns. For any investment income that has not pulled through from a third-party upload, as well as for any rental income and capital gains or losses, you will need to capture the full amount of income received by both spouses in both of your tax returns. SARS will automatically divide this income on a 50/50 basis. This will be reflected on the notices of assessment (ITA34) issued to both you and your spouse once the returns have been submitted. Your returns do not need to be submitted simultaneously to achieve this split. Exclusions from the communal estate Some income types, by law, aren’t included in the community of property. For instance, if someone inherits property or investments, and the deceased’s will specifically states it’s outside the communal estate, then it’s excluded. The tax return has a provision for indicating these exclusions. In the investment income section, there’s a box beside each item where you can mark an ‘X’ if that amount should be kept out of the communal estate (for those married in community of property). Marking this box ensures the exclusion and the full tax applies only to the spouse named on the investment. To prevent confusion and mistakes, it’s suggested that the spouse not receiving the income also marks this box on their return. Other income streams that are automatically excluded from the communal estate are: Salary income: Salaries have been taxed separately since the tax tables were harmonised in the early 1990s. This applies irrespective of one’s marital status. Business income: Income from a business, other than rental income, is taxed in the hands of the recipient. In the case of a partnership, each partner must declare the total income earned from the business, tick the box marked ‘Are you in a partnership?’, and enter the percentage interest held. Other considerations If you and your spouse are separated and such separation is likely to be permanent, you would need to submit an RRA01 form to SARS or lodge an objection against your return. If you and your spouse are divorced and you had omitted to amend your marital status from married in community of property to not married. You can submit a request for correction via e-filing. SARS will issue an amended assessment but is likely to request an upload of your divorce decree—particularly if the divorce was recent and the Home Affairs records have not yet been updated. WRITTEN BY STEVEN JONES Steven Jones is a registered SARS tax practitioner, a practising member of the South African Institute of Professional Accountants, and the editor of Personal Finance and Tax Breaks. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes. Powered by SucceedGroup
Can you change your marital regime after marriage?
A marital regime determines how parties’ assets will be managed and divided during their marriage and in the event of divorce or death. Changing the marital regime can provide parties with greater financial flexibility and protection. Understanding marital regimes In South Africa, there are three main marital regimes: In community of property: This is the default regime where both spouses share equal ownership of all assets and liabilities acquired before and during the marriage. Out of community of property with the inclusion of the accrual: Under this regime, each spouse maintains separate estates during the marriage, but the growth of their respective estates is calculated and shared equally upon the dissolution of the marriage. Out of community of property without accrual: In this regime, each partner’s assets and liabilities remain separate throughout the marriage, and there is no sharing of accruals upon divorce or death. In terms of section 21 of the Matrimonial Property Act, the marital regime can be changed by mutual consent and by way of an application by the parties to the High Court. Such an application requires compliance with specific procedures to ensure its validity. Both parties need to understand the implications and consequences of changing the marital regime and proper reason must be given for the change of the marital regime. It is important that there is full and proper disclosure when seeking to change a marital regime. The failure to provide full and accurate information may result in the order not being granted by the Court. The parties’ legal representatives will draft a postnuptial contract to reflect the newly chosen martial regime. This contract will specify the new regime the parties wish to adopt, such as transitioning from “in community of property” to “out of community of property with accrual”. The notarial contract must be attested by a notary public. The notary public will verify the identities of the parties and ensure they fully understand the terms and consequences of the proposed changes. The High Court will review the proposed changes and assess whether they are fair and reasonable. The court’s primary concern is to protect the rights of both parties and any potential creditors. It is important that the interests of the creditors, who might be affected by the change, are protected and therefore the court will give proper consideration before granting such an order. After the High Court’s approval and a court order is granted, the amended marital regime must be published in the Government Gazette and two local newspapers to inform creditors and any other interested parties of the change. Once the public notice has been completed, the amended marital regime is registered at the Deeds Office. Registration will finalise the changes and ensure their enforceability against third parties. It is crucial for the parties to carefully consider the implications of changing their marital regime. Each regime has its advantages and disadvantages, and seeking professional legal advice can help parties make an informed decision that aligns with their financial goals and preferences. Changing the marital regime is a legal process that requires careful consideration and adherence to specific procedures. It provides parties with an opportunity to adjust their financial arrangements to better suit their needs and protect their interests. By following the necessary steps, parties can navigate the process smoothly and ensure their new marital regime aligns with their future plans and financial security. WRITTEN BY MARITZA DU PREEZ Maritza du Preez is an Associate at Miller Bosman Le Roux Attorneys. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes. Powered by SucceedGroup