Article by listed attorney: Fawzia Khan
I came across an interesting article which focused on spousal donations from a divorce and estate planning perspective, which appeared in the De Rebus law journal, by E. Roux. According to Roux, he says that although we generally want to believe the best of our respective spouses, there is always a risk that the marriage will fall apart. He uses the following example to highlight the pitfalls of poor financial planning. A business man who is in a high risk profession has recently inherited valuable property. Rather than transfer it to a trust, he decides to donate it to his wife to whom he is married out of community of property (with the accrual system) so as to remove the property from his personal estate and avoid unnecessary taxes. After this donation has occurred the wife decides to file for divorce. The problem the man now faces is that the property has now been excluded from the accrual claim as it is a donation made to a spouse in terms of the provisions contained in s 5 of the Matrimonial Property Act 88 of 1984. Furthermore, assuming the husband is the breadwinner, he may also still have to pay an amount to the wife in terms of the accrual system of the marriage.
Therefore, the wife would have received the property and would also be able to claim additional assets that was accrued between them for the duration of the marriage. Double Eina!
Donations, including donations between spouses which were originally revocable by nature as a general rule are now not revocable. So if the divorce is consensual i.e. where both parties mutually agree that the marriage must be dissolved, then any donation between them will generally be regarded as being irrevocable.
However, where there is some blame or reason for the divorce which was caused by the conduct of the one spouse, which conduct must be both intentional, and of a sufficiently serious nature, for example the infidelity of such a spouse, the situation may well be very different. According to the author the donation could be revoked on the basis of ingratitude. He says an argument could then be made that the infidelity, being sufficiently serious enough to have caused an irretrievable breakdown of a marriage and by the very nature of the act could only be an intentional act, could be considered gross ingratitude. In terms of the Insolvency Act donations can be made to one’s spouse provided they are married out of community of property, but it must be done well before there are any problem with creditors so that there’s no risk of the donations being set aside as a voidable disposition.
It goes without saying that it is vital to obtain proper advice when planning your estate so as to avoid pitfalls later on.
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