BOITUMELA TSOKA: Welcome to the Money Savvy podcast. I’m Baitumelo Ntsoko. In a landmark ruling last week, the Pretoria High Court declared parts of the Divorce Act unconstitutional and invalid. According to various reports, this clears the way for spouses who married after November 1, 1984 – as part of “outside the community of property without accrual system” – to ask the court to act on its own and rule that any assets or any amount of money to be transferred from one spouse to another.
Eric Jordan, who is a certified financial planner at Crue Invest, joins us in this episode to give us a better idea of what this decision means and how it will affect marriage contracts as well as future divorces. Welcome, Eric.
Eric JORDAN: Thanks, Tumi. Thanks for the opportunity.
BOITUMELA TSOKA: Before we move on to the Supreme Court decision and what does that mean, could you give us a brief analysis of the Divorce Act?
Eric JORDAN: Of course. Divorce law is a piece of legislation that does regulate the way a divorce takes place – in other words, in terms of how the parties settle issues in the separation of their two classes, as well as issues related to guardianship, maintenance, etc. further. It is a piece of legislation that courts will use to determine how to enforce this divorce agreement.
BOITUMELA TSOKA: Please tell us more about this verdict and what will be the consequences if it is confirmed by the Constitutional Court?
Eric JORDAN: Of course, of course. As you said in the introduction, the decision, which was made in the High Court of Pretoria, concerned the question of when the parties entered into a marriage of common property, with the exception of the accrual system, and this marriage took place in 1988. When the parties divorced, the court asked to decide whether section 7.3 of the Divorce Act was constitutional, as it excluded a party married to a joint property without an accrual system after 1984 from claiming the property of another. hand, based on a fair distribution of these assets.
Where it came from is that in this case one party was a mother sitting at home, which means she took care of the family, took care of the children, made sure they were well educated – that meant that she could not attend to pursue her career, could not grow her own estate while her husband was in a position where he could continue his farming, and was very successful in doing so – and this allowed him to increase quite substantially your estate.
When the parties came to a situation where they had to dissolve the marriage and a divorce case arose, the wife wanted to fairly distribute the gain that had taken place in her husband’s estate while they were married.
In fact the point was that she wanted to have an equal share of the growth in this estate; in other words, the value she added to his estate while they were married.
BOITUMELA TSOKA: If someone is married under a similar contract but they are divorced for a while, is it possible to go to court now for a settlement?
Eric JORDAN: Yes. Each issue would have to be considered on the basis of the facts of each case. This can have various consequences, such as the date when the divorce took place, whether the divorce was under an amicable settlement agreement, or if it was a contentious issue on which the court ruled.
These are some of the factors that should be taken into account.
But, in fact, you can change the divorce decree, and you will have to either appeal the decision made by the court, or apply for an amendment to the divorce agreement or divorce decree issued by the court on the basis of amicable settlements.
The success of this will certainly depend on the facts of each issue, and this outcome will obviously depend on these factors.
BOITUMELA TSOKA: If anyone is thinking about this, should we wait until the Constitutional Court confirms this ruling?
Eric JORDAN: Yes, I think this will definitely be the first step. At the moment, the case has been referred to the Constitutional Court to confirm this decision. Once this is done, it will definitely give more direction and a stronger foundation on which you can apply for any such variation; or, if you are in the process of divorce, actually claim an asset allocation based on that decision.
BOITUMELA TSOKA: Those who are planning to get married, what should they consider when choosing a marriage contract – especially in light of this decision?
Eric JORDAN: So if you are looking for marriage and considering your options, there are currently three options for marriage regimes.
Or you will marry in joint ownership, which means that there is no formal agreement concluded before the date of marriage; this means that both of your estates are merged into one common estate, which obviously has certain practical implications and potential problems in the future, especially when considering the contractual capabilities of each party.
Another option would then be to be married with joint ownership, either with an accrual system or without an accrual system. The difference between the two is that the accrual system will automatically give the party at the end of the divorce the right to an equal share in the asset growth of each of the parties during the existence of the marriage. Therefore, it would be a much clearer requirement in terms of what each party will be entitled to.
The third option would be to marry a joint property without an accrual system, which means that there is no automatic claim to [the] growth in each other’s estates.
But yes, this new solution really opens the door not to leave the party destitute – if it was a system you decided to apply to your marriage and you stopped your own career to continue the marriage as such.
BOITUMELA TSOKA: What kind of financial planning should a husband who is at home do so that they do not get into an awkward situation after a divorce?
Eric JORDAN: Yes, it is very important when you sit at home with your spouse that you do financial planning almost independently to ensure that if anything happens – and we are talking not only about divorce but also about the death of one of the spouses and wife – what is your specific position. It is important to understand the implications of such an event and how your position is organized so that you can move forward in your own life.
Often couples can start investing in their personal ability and this can just provide some more security, such as a spouse who is at home that he or she will be able to at least look after while the other party’s property stops in the event of death or divorce , which is not subject to a claim that must be confirmed in court.
Obviously, from a spouse’s perspective, any donations made between a spouse are exempt from the donation tax, so this does not facilitate the ability to transfer assets from one spouse to another and have assets invested in the name of that particular spouse .
BOITUMELA TSOKA: Why would anyone go that route, fighting for a settlement and not, perhaps, go under the Maintenance Act?
Eric JORDAN: Often the Alimony Act only provides, say, certain restrictions on the lifestyle to which any person is accustomed, the duration of the marriage, and takes into account the personal property of individual spouses and what they will be entitled to [to]how they could provide for themselves.
This claim itself is much broader; it considers the full growth of the assets and must determine what is the fair distribution of the growth of the assets of each party during the existence of the marriage. It also looks at what contribution each spouse has made to this particular marriage and obviously what this has led to in terms of growth and asset value.
BOITUMELA TSOKA: The decision has sparked much debate on social media, with some arguing that the wife did not receive the agreement, saying that if the husband works alone, the least the wife can do is take care of the home and children.
However, as a downside to this, a few years ago a study found that if a housewife receives compensation for all the work she does, her pay could end up in the region of Rs 50,000 a month, which could be argued. as a significant saving for the husband. What do you think about this discussion?
Eric JORDAN: Yes, it’s a pretty tricky question. But really, if you look at it objectively, when you look at when the parties are married and they’re building a life together, each side really brings something to the whole, allowing either side to focus more on their career and build up wealth, while the other party potentially cares about raising a family and so on.
Thus, each party does bring value to the marriage, and it needs to be rewarded or viewed in some form or form. What an exact amount [for] this is a fair distribution, or what contribution each party makes in the marriage is very difficult to consider, as it very much depends on the lifestyle of the parties or what they are used to. So this needs to be considered on a case-by-case basis. But, [as] for me a matter of principle, this is definitely a justified claim to the other party in a divorce case.
BOITUMELA TSOKA: Thank you so much, Eric, for joining us in this episode.
Eric JORDAN: Thank you, and thank you so much for the opportunity. This is much appreciated.
BOITUMELA TSOKA: It was Eric Jordan, who is a certified financial planner at Crue Invest.