How you marry is not horse buying

Henry

One does not walk blindly into a marriage. Despite what the world and Hollywood tell us about quickie weddings under an Elvis pastor and all that, it’s not something I can agree with.

I’m not going to get into philosophical or religious terms here (just that – my position is simple – if Hollywood is trending in one direction, it’s at least good to ask yourself if it makes sense for you to follow), because that’s not the place for that not.

But it also affects your personal finances.

See, how you get married, and I’m talking about the legal gears behind it, namely inside or outside community of property (with or without the accrual), has significant implications.

No one marries to divorce. Anyway, I hope not. But life happens. And that’s not the only way marriages end. Death does not shame, and the dispensation under which you married has an influence when you die too.

Here you have to think soberly and decide, even if your heart (and your loins) are burning. In fact, sober decisions actually apply to all finances, but hey…

I know I say this every month, but take me even more seriously this month: go see someone who is qualified about this. Yes, lawyers and planners can be expensive. But you know what’s even more expensive? Having to scrape chestnuts out of the fire later.

What is in and out of community? What is accretion?

So, there is a reason why lawyers and legal professionals study so long. The stuff is very technical, and can get terribly complex.

I paint here with a broad brush.

So: within community of goods loosely means what was mine and yours now becomes ours together. Out of community of property means mine remains mine, and yours remains yours.

It’s obviously a lot more complex than that, and there are other ramifications (which we’ll get to shortly), but that’s the heart of it.

The accrual dispensation is a relatively complex system that sits somewhere between the two dispensations. Each of the married people lists before the wedding assets with which they enter the marriage. At the dissolution of the marriage, whether through divorce or death, one then looks at how everyone’s respective estates have grown.

Basically, a part of the one with the bigger growth goes to the other party.

Why one or the other?

Remember: there is not necessarily right or wrong here, just what will work for you.

Within community of property is the default option, unless you have a so-called HVK or prenuptial agreement in place.

It means everything merges. It’s tempting because, as already mentioned, no one gets married to get divorced. And that binds us together. And anyway, as the Bible says, we become one.

But… it also creates other problems. For example, you cannot enter into a contract without your spouse also signing, whether at the bank or the insurer or the mobile phone location. It is not only your assets that merge, but also your liabilities.

I now simplify further: At the dissolution of the marriage, it first becomes one, before your spouse is entitled to half of it. You can of course also bequeath the other half to them in your will.

The challenge comes where, for example, someone owns property (think typically a farmer), or has a business. Suppose you own Company ABC, and your wife dies, half of that company must go to the joint estate.

If one is sequestered, both are, because there are really only the joint assets.

Now: there are exceptions (you can specifically exclude assets, and heritage is usually not part of such a thing). But you don’t have to be a lawyer to see the challenges in this.

Out of community, without the accretion, means yours is yours and mine is mine and so it will remain (again, you can bequeath what you want in a will).

I illustrate the challenges with this with an example: suppose you and your spouse are married; you stay at home and pack toebies and drive the kids around and your other half climbs the company’s army to the top, even though you have a degree in engineering. It’s better for the kids. Your significant other later finds out they prefer their secretary to you, and divorces.

The house, the cars, the furniture in their name, well, it remains theirs.

Here, too, you don’t have to be a lawyer to see what the problems are.

Out of communion with the accretion try to be somewhere between the previous ones. You share in the growth with each other, but are also protected against the practical challenges that both have to sign contracts like with the community. And burdens remain the individual’s.

It’s definitely not perfect. I’m not going to go into terrible math here, but it’s probably the fairest system on balance.

One thing I have to mention explicitly here: it’s important that you think carefully about this in advance. If one of the parties were to list an asset in the prenuptial agreement for something you accumulated before the marriage, I would very strongly suggest that the other party also list something.

The way the accrual is calculated can create big problems if you don’t do this, and harm the party with the smaller growth in assets, which is not in the spirit of the accrual distribution.

Last things

There is much, much more to say on the subject. I didn’t even touch on common law or religious marriages.

Then just this in conclusion: My mother always says that communication is one of the most important things in a marriage, and it certainly is. It is also important before marriage. Before the wedding, talk to each other about this and state your views.

Also, should you separate, try to remember that you once loved each other.

You will save yourself grief later if you think carefully about this and not just decide emotionally. Yes, you can get a contract in place later, but it’s a much more expensive trip than an HVK ahead of time.

In any case, it’s good to step through these things. It shouldn’t be a secret to anyone that finances are something that couples can fight about quite a bit.

But, and it’s a lesson we can all remember daily, myself included, where the light shines, the darkness gives way.

  • Leon-Ben is a financial advisor, writer and musician of Wellington.

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