Financial planning for couples married with accrual system

The accrual system is a way to ensure that each spouse gains a fair share of whatever the couple has built together when the marriage comes to an end, either through divorce or death.

But, how does the accrual system affect a married couple’s financial planning, and what should they be aware of when making financial decisions?

If a couple is married with the accrual, each spouse is free to purchase fixed property in their own name (with no spousal consent) or as co-owners. Regardless of how the property is purchased, it will form part of the accrual and will be considered when the marriage is dissolved.

If a person owns fixed property at the time of entering an antenuptial contract, the value of the property at the time of the marriage should be recorded. This is because when the marriage is dissolved, the extent to which the property has increased in value from the date of marriage to the date of death/divorce will be included in the accrual calculation – meaning that only the profit is included in the joint estate for accrual purposes.

Remember, if the spouse obtained ownership of the property through inheritance before the marriage, such property can be excluded from the accrual in the antenuptial contract. Property obtained through inheritance during the marriage is automatically excluded from the accrual.

A significant advantage of the system is that each spouse remains responsible for their own debt. During the subsistence of the marriage, the marriage is effectively out of community of property in that each party’s estate remains separate.

This means if one spouse sets up a business which cannot pay its debts, the estate of the solvent spouse remains protected from creditors. Importantly, where a couple is married with the accrual, only the debt that they incurred from the commencement of their marriage is included in the accrual calculation.

Any debt that was incurred prior to their marriage will be excluded from the accrual calculation. It is important to note the reckless financial conduct of one spouse can serve to prejudice the other spouse’s share of the accrual, and our law provides recourse for this in section 8(1) of the Matrimonial Property Act.

In terms of this legislation, a spouse does not need to bring divorce proceedings to protect their share of the accrual but can rather bring an application for the immediate division of the accrual in order to protect their interests.

Eric Jordaan is a certified financial planner at Crue Invest.

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