When couples decide to get married, one of the key decisions they need to make is how they will structure their financial and legal affairs. In South Africa, there are two main marital regimes: in community of property and out of community of property (with or without accrual). While a marriage in community of property may sound like an ideal reflection of shared lives and assets, it’s essential to understand the drawbacks of this arrangement. Here are some of the key cons to consider before opting for a marriage in community of property.
1. Shared Debt Responsibility
One of the most significant downsides to a marriage in community of property is that both partners become jointly responsible for each other's debts. This means that if one spouse incurs debt—whether it’s from poor financial decisions, a failed business, or even medical bills—the other spouse is equally liable.
For example, if one spouse enters the marriage with substantial personal debt or accumulates debt during the marriage, creditors can claim against the couple's combined assets. Even if one partner had no involvement in the financial decisions that led to the debt, their assets can be used to settle the debt.
2. No Financial Independence
In a marriage in community of property, both spouses share ownership of all assets. This can lead to a lack of financial independence. For example, if one spouse wants to sell an asset, such as a car or a property, they cannot do so without the written consent of the other. This can make it difficult for spouses to make independent financial decisions.
Moreover, if one spouse wishes to start a business or invest in a new venture, they may face challenges in accessing credit or making business decisions without their partner’s consent.
3. Complications in Divorce
Divorce can be emotionally and financially draining, and being married in community of property adds extra layers of complexity. Since all assets and liabilities are shared equally, dividing these during a divorce can be difficult, especially when the assets are not easily split, such as a family home or investments.
The process of dividing assets can be lengthy and contentious, often resulting in legal battles that lead to higher legal fees and prolonged emotional stress.
4. Risk to Personal Assets
In community of property, even assets that one spouse brought into the marriage become part of the joint estate. This means that personal assets, such as an inheritance or property owned before the marriage, are included in the communal pot. In the event of financial difficulty, creditors could claim these assets to settle debts.
This can be particularly concerning for individuals who enter into a marriage with significant personal wealth, as they stand to lose half of their assets if the marriage ends in divorce or if their spouse faces financial difficulties.
5. Impact on Estate Planning
Estate planning becomes more complicated in marriages in community of property. Because all assets are shared, even assets that one spouse intends to leave to children or other family members may be difficult to allocate separately. Additionally, upon the death of one spouse, the surviving partner automatically inherits half of the joint estate. This can be problematic if a spouse wishes to allocate specific assets to children or beneficiaries from a previous marriage.
Furthermore, if the deceased spouse had any significant debts, creditors could lay claim to the joint estate, leaving the surviving spouse with reduced financial security.
6. Business Ownership Challenges
For individuals who own businesses, being married in community of property can create serious complications. A spouse who owns a business may find that half of the business becomes part of the joint estate, which can lead to challenges in decision-making and future business growth.
If the couple divorces, the non-business-owning spouse may claim a portion of the business or its value, which can result in the sale or division of business assets. This could jeopardize the financial health of the business and its future operations.
7. Limited Protection from Insolvency
Another critical drawback is the limited protection from insolvency. If one spouse is declared insolvent, both partners’ assets, as part of the joint estate, can be claimed to settle debts. This puts the financially stable spouse at risk of losing their personal and joint assets, even if they had no part in the financial troubles.
Conclusion: Is Community of Property the Right Choice?
While the idea of sharing everything in a marriage may appeal to some couples, it’s crucial to weigh the potential financial risks associated with a marriage in community of property. From shared debt responsibility to the lack of financial independence and the risk to personal assets, this marital regime can bring more challenges than benefits for many couples.
For those who prefer financial security, independence, and flexibility, considering an out of community of property marriage (with or without accrual) might be a better option. Consulting with a legal or financial advisor before making this decision is highly recommended, ensuring that both partners fully understand the implications of their marital regime choice.