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Division of Assets on Divorce
At divorce spouses can enter into a settlement agreement, referred to as a consent paper, which will regulate the proprietary issues flowing from the termination of their marriage. Settlement is usually achieved through negotiation, mediation, mutual agreement between the spouses or settlement meetings between attorneys The spouses have full contractual freedom to either apply the matrimonial property regime applicable to their marriage or to draw up a settlement agreement that they find better suited to their specific circumstances and needs. The settlement agreement will then be made an order of the court when the decree of divorce is granted.
What happens when your are unable to settle your divorce? The only way to resolve the issues where settlement cannot be reached is to litigate. At the end of the litigation process a judge will make a ruling on the division of assets depending what marital regime is applicable to your marriage.
The consequences of divorce when you are married in community of property.
After a divorce trial, the default position is that the assets of the joint estate as at the date of divorce will be divided equally between the parties, unless a spouse claims forfeiture and the court grants such a forfeiture order. A forfeiture order cannot be granted automatically and must be specifically pleaded in the summons. In terms of the South African Divorce Act 70 of 1979, the court has discretion when granting a divorce on grounds of irretrievable breakdown for a marriage in community of property to order that the patrimonial benefits of one party be forfeited in favour of the other.
A gift received during the marriage does not fall within the assets that a party can forfeit and a spouse cannot forfeit assets that he/she brought into the joint estate.
When spouses are married in community of property, their assets are tied up in the joint estate and, when a court grants a decree of divorce, the assets must be divided. Where the spouses agree on a division of the joint estate, a settlement agreement may be drafted to be incorporated in the decree of divorce and made an order of the court. Where spouses do not reach an agreement on how to divide their joint estate (as often happens), the court has the power to appoint a receiver or liquidator to realise and divide the assets of the joint estate on its behalf.
Where one spouse is acting in a negligent or reckless manner and alienates assets of the joint estate pending divorce, the other spouse may lodge an application to the court to suspend his/her spouse’s capacity over the joint estate. When the court grants such an order, the spouse who brought the application may then control the estate without the other’s consent.
The consequences of divorce when you are married out of community of property without the accrual.
In this system, when couples marry each spouse keeps a separate estate and whatever assets and liabilities they individually had before the marriage form part of their separate estates. Furthermore, assets and liabilities acquired by each during the marriage also fall within their separate estates. This system gives each spouse absolute independence of contractual capacity and protects each spouse’s estate against claims by the other spouse’s creditors.
A marriage is out of community of property if it falls within one of the following categories:
The consequences of divorce when married out of community of property before 1 November 1984.
A ‘redistribution of assets’ section was introduced in the Divorce Act to assist spouses who married out of community of property prior to the enactment of the Matrimonial Property Act 88 of 1984. Although this section may only apply to a relatively small number of marriages, it is important to a particularly vulnerable class of women, namely older women who are less likely to find employment upon divorce and who do not qualify for either child-support grants (as their children would be older) or state pensions.
This reforming and remedial measure applies to marriages out of community of property entered into between whites, coloureds and Asians before 1 November 1984, and to black people married out of community of property in terms of the old Black Administration Act 38 of 1927, prior to the commencement of the Marriage and Matrimonial Property Law Amendment Act 3 of 1988. It was introduced to redress the financial imbalance invariably suffered by the wife on termination of the marriage by divorce.
In the absence of a divorce settlement agreement between the spouses, they retain their own separate estates and there is no sharing of assets on divorce, unless the court granting the decree of divorce orders a redistribution of assets between the parties in terms of Section 7(3) of the Divorce Act. A pension interest forms part of the spouse’s estate and will form part of the assets if redistribution is ordered. The parties may also agree to share the pension interest.
The court will not grant a redistribution order unless it is satisfied that it is equitable and just to do so. Apart from contributions made by the party concerned, the court will also take into account, among other things, the existing means and obligations of both parties. The Act sets out two requirements that must be met if the court is to consider granting a redistribution order:
Although the law allows either spouse to apply for a redistribution order, in practice this section has largely been used by women. In past cases, the courts have
The court is thus enjoined to apply discretion, justice and equity in coming to the assistance of the financially disadvantaged spouse.
The consequences of divorce when married out of community of property without the accrual after 1 November 1984
In a marriage out of community of property without the accrual contracted after 1 November 1984, there can be no claim for a transfer of assets. The argument is that there are now three matrimonial property regimes to choose from, and if the parties willingly decided to marry out of community of property and without the accrual system, one of the parties cannot later request a redistribution of assets. In such a regime, upon divorce, each party will retain their separate estates, i.e. what they had upon marriage and including all growth to the separate estate that occurred during the marriage, minus any losses that may have been sustained. For example, if the husband came into the marriage with R10 000, he would leave with R10 000 + profits ˗ losses. The only claim a spouse may institute would be for spousal maintenance.
The consequences of divorce when married out of community of property with the accrual.
Accrual is a way to ensure that both spouses in a marriage gain a fair share of the estate once the marriage comes to an end. The accrual system does not apply automatically to all marriages out of community of property. For the accrual system to apply, the antenuptial contract must be drafted in a certain way. The accrual system incorporates a calculation that is applied when the marriage is dissolved by divorce. The spouses will share the assets during the course of their marriage based on a particular calculation when the marriage is terminated.
The term ‘accrual’ is used to denote the net increase in value of a spouse’s estate since the date of marriage. In other words, what was yours before the marriage remains yours, and what you have earned during the marriage belongs to both of you. Because the right to share in accrual is exercisable only upon dissolution of the marriage, such a right is not transferable and cannot be attached by creditors during the subsistence of the marriage.
The following assets are not taken into account when determining the accrual (are not included in the net value of the estate):
The mere fact that the assets of a trust are vested in the trustee does not per se exclude them from consideration when determining what must be taken into account when making a redistribution order or considering an accrual claim. Where a spouse has transferred assets in his/her name into a trust, in order for the court to take such assets into account, there must be evidence first that the party in question controlled the trust, and second that, but for the trust, he/she would have acquired and owned the assets in his/her own name.
Commencement values and accruals
Where parties wish to enter into an antenuptial contract with the accrual system, they must make sure that the commencement values of their respective estates (i.e. how much their estates are worth at the time of marriage) have been verified and accepted by both parties. It often happens in divorce matters that one party will allege that the other’s commencement value was inflated or completely inaccurate.
Upon the dissolution of the marriage by divorce, the net estate value (assets less liabilities less excluded assets and/or commencement values) of each estate is determined separately. The larger estate must then transfer half of the difference to the smaller estate. Putting it another way, the smaller estate must claim for an amount equal to half of the difference between the accruals of the respective estates. The right to share in the accrual only commences upon dissolution of the marriage by divorce.
The commencement value to be subtracted from the current value of the estate must be adjusted with the consumer price index (CPI) to make provision for any change in the value of money. To calculate the adjustment, go to www.statssa.gov.za and click on ‘Historical CPI’ and then on ‘Key indicators’. The factor by which the commencement value must be multiplied to get to the adapted value is calculated by dividing the value for the month of the dissolution of the marriage by the value for the month in which the parties were married.
For example:
Mr and Mrs Cruise were married in May 1990, and divorced in March 2012. In May 1990, Mr Cruise had a commencement value of R10 000. According to the CPI table:
May 1990 = 26.1
March 2012 = 120.9
Thus: 120.9 ÷ 26.1 = 4.6321
This adapted commencement value will be deducted from Mr Cruise’s assets.
Determine the each estate’s accrual as follows:
What happens when your are unable to settle your divorce? The only way to resolve the issues where settlement cannot be reached is to litigate. At the end of the litigation process a judge will make a ruling on the division of assets depending what marital regime is applicable to your marriage.
The consequences of divorce when you are married in community of property.
After a divorce trial, the default position is that the assets of the joint estate as at the date of divorce will be divided equally between the parties, unless a spouse claims forfeiture and the court grants such a forfeiture order. A forfeiture order cannot be granted automatically and must be specifically pleaded in the summons. In terms of the South African Divorce Act 70 of 1979, the court has discretion when granting a divorce on grounds of irretrievable breakdown for a marriage in community of property to order that the patrimonial benefits of one party be forfeited in favour of the other.
A gift received during the marriage does not fall within the assets that a party can forfeit and a spouse cannot forfeit assets that he/she brought into the joint estate.
When spouses are married in community of property, their assets are tied up in the joint estate and, when a court grants a decree of divorce, the assets must be divided. Where the spouses agree on a division of the joint estate, a settlement agreement may be drafted to be incorporated in the decree of divorce and made an order of the court. Where spouses do not reach an agreement on how to divide their joint estate (as often happens), the court has the power to appoint a receiver or liquidator to realise and divide the assets of the joint estate on its behalf.
Where one spouse is acting in a negligent or reckless manner and alienates assets of the joint estate pending divorce, the other spouse may lodge an application to the court to suspend his/her spouse’s capacity over the joint estate. When the court grants such an order, the spouse who brought the application may then control the estate without the other’s consent.
The consequences of divorce when you are married out of community of property without the accrual.
In this system, when couples marry each spouse keeps a separate estate and whatever assets and liabilities they individually had before the marriage form part of their separate estates. Furthermore, assets and liabilities acquired by each during the marriage also fall within their separate estates. This system gives each spouse absolute independence of contractual capacity and protects each spouse’s estate against claims by the other spouse’s creditors.
A marriage is out of community of property if it falls within one of the following categories:
- the parties entered into a valid antenuptial contract, also called a pre-nuptial contract prior to their marriage that excludes community of property;
- the parties changed their marital regime by way of a court application from in community of property to out of community of property;
- the parties are black South Africans who married prior to 2 December 1988 without entering into an ANC; or
- the legal system of the country in which the husband was domiciled at the time of the marriage dictates that the parties will be married out of community of property.
The consequences of divorce when married out of community of property before 1 November 1984.
A ‘redistribution of assets’ section was introduced in the Divorce Act to assist spouses who married out of community of property prior to the enactment of the Matrimonial Property Act 88 of 1984. Although this section may only apply to a relatively small number of marriages, it is important to a particularly vulnerable class of women, namely older women who are less likely to find employment upon divorce and who do not qualify for either child-support grants (as their children would be older) or state pensions.
This reforming and remedial measure applies to marriages out of community of property entered into between whites, coloureds and Asians before 1 November 1984, and to black people married out of community of property in terms of the old Black Administration Act 38 of 1927, prior to the commencement of the Marriage and Matrimonial Property Law Amendment Act 3 of 1988. It was introduced to redress the financial imbalance invariably suffered by the wife on termination of the marriage by divorce.
In the absence of a divorce settlement agreement between the spouses, they retain their own separate estates and there is no sharing of assets on divorce, unless the court granting the decree of divorce orders a redistribution of assets between the parties in terms of Section 7(3) of the Divorce Act. A pension interest forms part of the spouse’s estate and will form part of the assets if redistribution is ordered. The parties may also agree to share the pension interest.
The court will not grant a redistribution order unless it is satisfied that it is equitable and just to do so. Apart from contributions made by the party concerned, the court will also take into account, among other things, the existing means and obligations of both parties. The Act sets out two requirements that must be met if the court is to consider granting a redistribution order:
- the spouse seeking the order must have contributed directly or indirectly to the maintenance or the increase of the other spouse’s estate during the marriage; and
- the court must be satisfied that by reason of such a contribution, it would be equitable and just to make a redistribution order.
Although the law allows either spouse to apply for a redistribution order, in practice this section has largely been used by women. In past cases, the courts have
- specifically considered the historical gender imbalance that made it more difficult for women to access the labour market;
- acknowledged that wives’ household duties should not be viewed as of less value than the employment duties of the husband;
- noted that the Act is sufficiently worded to cover any contribution a spouse makes, including the ordinary duties of a wife; and
- found that it is not always necessary for an applicant to show which assets he/she contributed to, but merely to prove that a contribution was made to the other spouse’s estate.
The court is thus enjoined to apply discretion, justice and equity in coming to the assistance of the financially disadvantaged spouse.
The consequences of divorce when married out of community of property without the accrual after 1 November 1984
In a marriage out of community of property without the accrual contracted after 1 November 1984, there can be no claim for a transfer of assets. The argument is that there are now three matrimonial property regimes to choose from, and if the parties willingly decided to marry out of community of property and without the accrual system, one of the parties cannot later request a redistribution of assets. In such a regime, upon divorce, each party will retain their separate estates, i.e. what they had upon marriage and including all growth to the separate estate that occurred during the marriage, minus any losses that may have been sustained. For example, if the husband came into the marriage with R10 000, he would leave with R10 000 + profits ˗ losses. The only claim a spouse may institute would be for spousal maintenance.
The consequences of divorce when married out of community of property with the accrual.
Accrual is a way to ensure that both spouses in a marriage gain a fair share of the estate once the marriage comes to an end. The accrual system does not apply automatically to all marriages out of community of property. For the accrual system to apply, the antenuptial contract must be drafted in a certain way. The accrual system incorporates a calculation that is applied when the marriage is dissolved by divorce. The spouses will share the assets during the course of their marriage based on a particular calculation when the marriage is terminated.
The term ‘accrual’ is used to denote the net increase in value of a spouse’s estate since the date of marriage. In other words, what was yours before the marriage remains yours, and what you have earned during the marriage belongs to both of you. Because the right to share in accrual is exercisable only upon dissolution of the marriage, such a right is not transferable and cannot be attached by creditors during the subsistence of the marriage.
The following assets are not taken into account when determining the accrual (are not included in the net value of the estate):
- Any asset excluded from the accrual system under the antenuptial contract, as well as any other asset that the spouse acquired by virtue of his/her possession or former possession of such asset.
- Any inheritance, legacy, trust or donation received by a spouse during the marriage from any third party, as well as any other asset that the spouse has acquired by virtue of his/her possession or former possession of the inheritance, legacy, trust or donation, unless the spouses have agreed otherwise in their antenuptial contract or the testator/trix or donor has stipulated otherwise.
- Any donation between the spouses.
- Any amount that accrued to a spouse by way of damages (e.g. slander), other than damages for patrimonial loss or the proceeds of an insurance policy in respect of a dread disease.
The mere fact that the assets of a trust are vested in the trustee does not per se exclude them from consideration when determining what must be taken into account when making a redistribution order or considering an accrual claim. Where a spouse has transferred assets in his/her name into a trust, in order for the court to take such assets into account, there must be evidence first that the party in question controlled the trust, and second that, but for the trust, he/she would have acquired and owned the assets in his/her own name.
Commencement values and accruals
Where parties wish to enter into an antenuptial contract with the accrual system, they must make sure that the commencement values of their respective estates (i.e. how much their estates are worth at the time of marriage) have been verified and accepted by both parties. It often happens in divorce matters that one party will allege that the other’s commencement value was inflated or completely inaccurate.
Upon the dissolution of the marriage by divorce, the net estate value (assets less liabilities less excluded assets and/or commencement values) of each estate is determined separately. The larger estate must then transfer half of the difference to the smaller estate. Putting it another way, the smaller estate must claim for an amount equal to half of the difference between the accruals of the respective estates. The right to share in the accrual only commences upon dissolution of the marriage by divorce.
The commencement value to be subtracted from the current value of the estate must be adjusted with the consumer price index (CPI) to make provision for any change in the value of money. To calculate the adjustment, go to www.statssa.gov.za and click on ‘Historical CPI’ and then on ‘Key indicators’. The factor by which the commencement value must be multiplied to get to the adapted value is calculated by dividing the value for the month of the dissolution of the marriage by the value for the month in which the parties were married.
For example:
Mr and Mrs Cruise were married in May 1990, and divorced in March 2012. In May 1990, Mr Cruise had a commencement value of R10 000. According to the CPI table:
May 1990 = 26.1
March 2012 = 120.9
Thus: 120.9 ÷ 26.1 = 4.6321
This adapted commencement value will be deducted from Mr Cruise’s assets.
Determine the each estate’s accrual as follows:
- Draft a list of all the assets, such as immovable property, furniture, vehicles, pension interest, annuities, policies, investments, bank accounts and interests such as shares and loan accounts in companies/partnerships/trusts or any other form of business, etc. obtained during the marriage at the present day values.
- Deduct the assets that were excluded in the antenuptial contract, as well as any other assets acquired by virtue of the possession, or former possession, of the excluded assets. Deduct inheritances, legacies or donations, as well as any other asset acquired by virtue of the possession, or former possession, of the inheritances, legacies or donations.
- Deduct any debts and liabilities.
- Deduct the commencement value, as stated in the antenuptial contract and adjusted by CPI.
- The net result will be the accrual in the estate.