This will pave the way for all spouses married out of community of property without accrual to seek some form of relief when they’ve contributed to a marriage in non-financial ways.
Section 7(3) currently provides that spouses married out of community of property before 1984, may apply to the court for a redistribution of assets, despite their marital regime being out of community of property.
What’s so special about 1984?
It’s the year in which the Matrimonial Property Act introduced the accrual system for marriages out of community of property. Couples married out of community of property before 1984 didn’t have the option of accrual so it’s not applicable to their marriage – unless they subsequently applied to change their marital regime.
The public are generally familiar with accrual being the ability to have the best of both worlds. It allows you to retain separate property and act independently of your spouse, while still enjoying a form of joint estate whereby anything accrued during the marriage is shared between the spouses. We commonly hear of there being an “accrual claim” (meaning a claim to split assets acquired during the marriage) by one of the spouses, either on death or divorce.
Now that’s settled, let’s return to the judgement at hand
First things first, it’s important to bear in mind that this judgement doesn’t deal with the question of spousal maintenance, but rather with overriding the provisions of an antenuptial contract in order to allow a spouse to share in their spouse’s actual assets. There will, accordingly, be a plethora of influential factors in each spouse’s attempt to make their claim.
In the case at hand, the estranged wife of a wealthy farmer sought the court’s assistance in declaring section 7(3) unconstitutional as it didn’t allow for a redistribution of assets in her circumstances. The parties were married in 1988 out of community of property, without accrual. One would be inclined to argue that the wife had a choice of accrual at the time.
However, she claims she was forced into signing an antenuptial contract, without accrual and now has no claim to the empire her husband built with her help. (And what an empire. You can read all about it in the bestselling book Fortunes – The Rise and Rise of the Afrikaner Tycoons where he is described as a “mega-farmer ultrapreneur”.)
If you fail to plan, you plan to fail
Core to her argument was that the provision only allowed spouses married out of community of property to seek a redistribution order if their marriage was entered into prior to 1984. This, coupled with a very convincing argument centred around the wife’s contribution to the marriage, the household, working on the farm and raising the children, is what led the court to take exception with the words “prior to 1984” used in section 7(3).
The court declared this phrase to be inconsistent with the Constitution as it afforded the option only to those married out of community of property prior to 1984, while excluding those married out of community of property after 1984. It’s this imbalance in equal opportunity that the court took issue with.
The fight is not yet won
All eyes will now turn to the Constitutional Court to see if the highest court in the land agrees with the Pretoria High Court. If they do, this will then pave the way for all spouses married out of community of property without accrual to seek some form of relief when they’ve contributed to a marriage in non-financial ways. Alternative means of contribution to a marriage have long been recognised during South African divorce proceedings. This, coupled with the fact that the core objective of our Constitution is equality before the law, is why legal professionals are largely anticipating that our Constitutional Court will agree with the Pretoria High Court’s views.
What does this mean for me?
Generally, if you’re married out of community of property, your estate planner will note it and move on. If you’re married subject to the accrual system, further discussions with your estate planner and/or financial advisor might centre around who has a potential claim – and attempting to try to plan for that by providing for some liquidity.
With this judgement so fresh, it’s too early to issue general rules of thumb about planning for the possibility of a redistribution. One can only deal with the possibility on a case-by-case basis until more generally accepted forms of guidance are available. After evaluating the case, your estate planners and financial advisors can determine whether you’re at lower or higher risk of a redistribution.
What about deceased estates?
Although the Divorce Act is currently the focus, there’s a possibility that a spouse will see this judgement as an opportunity to make a claim against a deceased estate. Death is, after all, an event that annuls a marriage. Allowing this would surely be seen as providing equal opportunity – a core objective of our Constitution.
If this were to happen, executors would have to be guided by the court order that would set out what relief must be awarded or not awarded. Bear in mind that litigation in the estate will result in delays in the finalising of your estate and might even see a rise in executor fees, or the disallowance of any dispensations previously offered by the relevant executor on their fees.
The bottom line
It’s never a bad idea to plan ahead. As Benjamin Franklin said, “If you fail to plan, you plan to fail.” It’s crucial to have comprehensive estate planning if you discover that you might be at higher risk of falling victim to things like a potential redistribution in terms of section 7(3). At Sentinel, our estate planners have hugely symbiotic relationships with your financial advisors, making this a dream team for you and your estate planning needs. For more information, or to sit down with a professional, contact Sentinel International Advisory Services today.