BUSINESS NEWS - If you and your spouse are married in community of property, you share a common estate and financial planning should therefore be easy – although, unfortunately, this is not always the case.
In community of property is an imperfect system and being aware of its shortcomings is essential in the context of financial planning.
Here are some considerations when managing your finances in a community of property marriage.
If you are married in community of property, you will not have signed an antenuptial contract. This is because you and your spouse jointly own a common estate in equal, undivided shares and, as such, no contract needs to be entered into.
In community of property is the default marital regime and, in the absence of an antenuptial contract, your marriage will be deemed to be in community.
In a community of property marriage, all assets and liabilities belonging to you and your spouse are merged together into one joint or communal estate, subject to a few exceptions. For instance, if a will stipulates that an inheritance should not form part of the joint estate, then that inheritance must be excluded.
While this form of marital regime provides a holistic view of your finances, there are flaws to this system that can be disadvantageous such as the issue of debt.
Debt and insolvency
Important to keep in mind is the fact that an in community of property marriage means that you and your spouse are jointly liable for each other’s debt, including debt that you and your spouse incurred before you got married – including maintenance obligations to a previous spouse or to children from a previous relationship.
Further, because your estate is viewed as a single estate, your spouse has the capacity to bind the joint estate through his actions.
This means that your spouse can incur debt without your knowledge and, in doing so, make you jointly liable for repaying the debt.
You and your spouse remain jointly and severally liable for all debt in the estate, meaning that you are both equally and fully responsible for the repayment of the debt. Further, if your spouse is unable to pay his debt, his creditors have a claim against the joint estate which could lead to both of you being declared insolvent.