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The implications of marriage in Community of Property

Sanlam Financial Services - Thinking ahead in financial services

Marriage in community of property requires being informed of the implications of insolvency and death for your estate.

If you think your marriage in community of property means that only half of your and your spouse's assets are exposed to the consequences of insolvency and to executor's fees, think again!

Berrie Botha, chief executive of Sanlam Trust, says couples married in community of property are often confused or uncertain about the rules applicable to their estate when one of them is declared insolvent or dies.

By law, people married in community of property each own half an undivided share in all assets in their joint estate. According to him it is irrelevant in whose name the assets are registered, although certain assets may be excluded, for example an inheritance received and which is subject to a specific testamentary provision that excludes it from any joint estate.

Berrie says that during insolvency the joint estate, including all assets specifically excluded from such an estate, are sequestrated as a community in property means that both persons are co-responsible for all liabilities.

“When one of the persons in a joint estate dies, the executor will by law administer the entire estate and not only one half of the deceased's share. Therefore executor and Master's fees are calculated on the gross value of the joint estate and all other standard administration costs are also payable from the joint estate.”

If a man is the surviving spouse in a joint estate, says Berrie, he is generally the one who objects to all costs as men often regard most of the assets as their own.

He explains that in the estate of the surviving spouse the same costs are payable at the rates prevailing at the time. “Furthermore, all liabilities have to be discharged, unless the surviving spouse, if he or she is the only heir, is able to take them over.”

Berrie says that in the calculation of estate duty only the one half of the net joint estate is taken into account. “At the distribution of the net estate the surviving spouse is entitled to one half, and the other half is distributed in accordance with the will. The surviving spouse may not necessarily be the heir.”

Berrie explains that executor's fees in the estate of the first-dying spouse can be limited by negotiating the amount or percentage in the will while he or she is still alive.

At death the nominated executor can then decide whether he or she wants to accept executorship or not. If it is not accepted and no alternate executor was named who is willing to accept this duty, the heir will have to make arrangements for the appointment of an executor and negotiate a fee for the administration of the estate.

According to Berrie, administration costs and executor's fees can also be limited in the estate of the surviving spouse by, among others, not nominating the surviving spouse as the only heir, but only bestowing certain rights on him or her.

Ultimately, says Berrie, the aim is to avoid confusion regarding wills and estates through proper planning, followed up by a correctly drawn-up will.

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