Married in community of property: what happens when a spouse dies

Last updated on 5th January, 2024 at 01:34 pm

If you are married in community of property, or considering this marital contract, it’s important to understand the financial implications when a spouse dies. Read on to find out what estate planning and financial experts want you to know about this marital contract.

No ‘yours’ or ‘mine’, only ‘ours’

Getting married in community of property is an attractive route for some couples. “It’s the most affordable way to get married because you don’t need to consult with an attorney to draw up an antenuptial contract,” says Jyoti Gopee, a financial planner at Pinnacle BlueStar, underwritten by Sanlam. “However, it is important that you understand the financial implications of the same.”

In the eyes of the law, when you are married in community of property, there is no ‘yours’ and ‘mine’ when it comes to your assets or your liabilities; there is only ‘ours’. “This is true, regardless of whether these are registered in both your names or only in one of your names,” says David Thomson, senior legal advisor at Sanlam Trust.

So, when either you or your partner dies, whatever debts your spouse may have had become your responsibility to settle. “This even applies to debts and assets owned before your date of marriage,” says Jacolene Hamman, National Legal Coordinator at SanlamConnect. “The executors handle the winding up of the estate, taking into account all assets and liabilities of both spouses, ensuring creditors are paid before distributing the estate,” she adds.

One way to protect yourself from being stripped of certain assets is to ensure these are specified in a will to be separate from your joint estate. “Assets may be excluded from the joint estate. For example, if a will stipulates that an inheritance should not form part of the joint estate of any marriage that the heir may enter into, then the inherited assets are excluded,” says Thomson.

So, what are you entitled to?

Once the debt of the late estate has been settled, the surviving spouse is entitled to 50% of the net estate proceeds, says Gopee. “Thereafter, the remaining 50% (residue of the estate) will be transferred to the nominated beneficiaries. This could be the surviving spouse and/or any third party.” Hamman notes that the exception occurs when a couple has decided to mass their estate at death. This means the deceased’s half-shares of the joint estate are combined in a single massed estate with those of the remaining spouse.

Will your cash flow be impacted?

By virtue of being married in community of property, everything is shared, and if you have a joint bank account, it will be frozen upon either of your deaths. No access to your bank account means no money for immediate living expenses and admin relating to laying your spouse to rest. “Joint bank accounts can be accessed once the letter of executorship has been issued by the Master’s Office. However, with COVID-19 there is a backlog in respect of issuing the Letter of Executorship,” notes Gopee. It would be wise to explore options of a separate single bank account to help with immediate cash flow if your spouse dies.

Watch out for property transfer costs

Say you are married in community of property, and both you and your spouse jointly own a property – perhaps the property you live in together. If your spouse dies, and they had bequeathed their portion of the property to you, you would still have to pay transfer costs on their half of the estate to be transferred into your name. “Or, if they had bequeathed their half of the property to a third party, this is more complex, as you would then co-own a fixed property with a third party,” adds Gopee.

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The need for comprehensive estate planning

Choosing to marry in community of property should be an informed decision that you and your spouse make together and in agreement. Grappling with the trauma of losing a life partner is hard on its own; the last thing either spouse should have to deal with is discovering ‘skeletons in the closet’ about their deceased partner’s financial affairs. Gopee says examples include either having accrued insurmountable levels of debt that you, the remaining spouse, could not settle, or having lent to third parties that you were unaware of. “Continuous transparency together with financial education between spouses is crucial to ensure that the surviving partner is well equipped to make decisions pertaining to the inheritance, monthly expenses and once-off capital expenses (downsizing the family home, changing motor vehicles, etc),” she says.

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The need for a will in marriage

“Although there is no one-size-fits-all approach, there are simple steps and precautions a couple married in community of property can take to avoid unintented consequences and possible negative complications for the surviving spouse,” says Thomson. From an estate planning perspective, it’s advisable to draw up a joint will if you are considering marrying in community of property, or if you are already so married. However, it is a common trend for couples to execute separate wills, as opposed to a joint will, says Thomson. “If you opt to draw up single wills, then it is important that you only deal with your own half of the joint estate.”

Meeting with a qualified financial planner as a couple affords you the opportunity to get an objective analysis of the impact of your wills and whether the way they are drafted will result in cash shortfalls or claims for maintenance by the surviving spouse when either of you die. Book a meeting today.