When it comes to marriage, there are a minefield of stories and beliefs that come to us as to the right and wrong way to run a marriage, and in particular, money in a marriage. An important topic that governs the future of your assets, it all comes down to the WAY you’re married.

None of us like to talk about death or divorce in the weeks before we get married, it brings out the worst in us. So today’s episode provides a non-emotional perspective on the subject because it’s imperative to be very clear on the way you’re married, as it strongly impacts how your assets will be impacted by creditors, death and divorce.

I really implore you that if you know a person who is considering getting married, please send them this episode so that they can make informed decisions.

Show Notes

• [02.42] It all starts with how you’re married

• [07.48] Community of Property

  • Pro’s

  • Con’s

• [11.01] Ante Nuptial Contract

  • Pro’s

  • Con’s
    

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Quotes

"Sometimes it requires us finding someone we trust to help us understand something in a different light so we can make a decision as to what WE think is right or wrong." - Lisa Linfield

"Truly, the only way to protect assets when you are married in community of property is to put them in a trust right from the beginning." - Lisa Linfield

“The only time an Ante Nuptial Contract can be done is before you are married.” - Lisa Linfield

“The red-light warning that is a major one for me, is a straight Ante Nuptial Contract with NO reference to a 50:50 split of assets accrued during the marriage on death or divorce.” - Lisa Linfield

Script:

184 – Why the way you’re married changes EVERYTHING!

Hello everyone and welcome to today’s episode of Working Women’s Wealth.  I’m Lisa Linfield and I’m building a community of Women who are committed to the journey of living Financially Free lives – so that we can have the money that enables us to CHOOSE – IF we want to work, where we work, and when, so that we can follow our dreams.

Today I chatted with a very good friend on who should own what in a marriage – and what the strategy should be… and I realised that it’s such an important topic that I should share my thoughts with you all.  Today is the first of a two part series.

The problem starts with some faulty thinking that The World Out There gives us.

As I mentioned in my book, Deep Grooves, part of changing our lives is to strongly examine the stories our parents, community, friends, teachers and social media (The World Out There) tell us as what is right and wrong.  With almost everything we believe, we need to stop, examine the facts from all directions and then we need to work out what the adult version of us actually believes.  Sometimes it requires us finding someone we trust to help us understand something in a different light so we can make a decision as to what WE think is right or wrong.

When it comes to marriage, that’s a minefield of stories and beliefs that come to us as to the right and wrong way to run a marriage, and in particular, money in a marriage.  So take this as another voice from The World Out There, but one which I hopes sheds a non-emotional perspective on the subject.

It all starts with how you’re married

And for people already married, that’s a challenge.  But I want you to understand this section clearly as it influences everything you have.

In all countries there is marriage law and marital property law.

Marriage law says who can get married, who can marry them, and how that marriage becomes legal in the eyes of the country. 

Marital property law gives the rules around the assets or things you own before, during and after the marriage ends by death or divorce.  For the purposes of this episode, we are talking about marital property law.

There are two basic ways you can get married in most countries. 

1.       Community of Property – where everything is shared during and after the marriage, and unless otherwise stated, what assets or investments you come into the marriage with also gets included for sharing.  For almost all intents and purposes when it comes to money, you are one legal entity.  Banks see you as one entity, lenders see you as one entity, but, crucially, creditors see you as one entity.

2.       Ante Nuptial Contract – this is where you sign a contract before the day of your wedding that keeps you as two separate legal entities during your marriage, and the contract pre-defines what happens at the end of the marriage through death and divorce.

 So here’s the problem we all have… and I know it from personal experience.  None of us like to talk about death or divorce in the weeks before we get married.  It brings out the worst in us:

·         Either our naïve, happily-ever-after view of life where we don’t stand up for ourselves OR

·         The discussion brings out our fear responses of fight, flight or freeze… and it’s a horrible, difficult conversation

When this little chapter in our story hit John and I, it was not an easy discussion.  And, like all our behaviour, mine was rooted in my past experiences, and John’s in his upbringing about marriage.

When I was at university, my dad’s business got into trouble and needed to be shut down because he was in the manufacturing industry – and the machines he had bought were financed by the bank lending him money.  In one year, the interest rate more than doubled, and the business couldn’t support such high debt costs.

And, because the debt couldn’t be paid, and my dad had signed personal surety for it (as you do when you own your own business), the creditors came for his personal assets to pay back the debt owed.

Fortuneately, at a time when it very much wasn’t the ‘done thing’, my parents had an anti-nuptial contract.  And therefore they were two separate legal entities.  So the creditors couldn’t take anything that was owned in my mum’s name.  And the house we live in was. 

At one of the hardest periods of my family’s life, we were protected against the devastation of losing our home and everything in it.

Which brings me back to John and I getting married.

I believe that everyone should get married with an ante nuptial contract – because it protects you from creditors.  John and I were both in corporate when we got married, and neither of us had any thought that either of us would start a business, so have creditors that could come after us.  But we also knew that life is long, and we wanted to have the option of this.

And, having lived through the protection of an ante nuptial contract, I was absolutely certain I wanted to protect my family with one.

John however, like most of us, came from a culture where you got married for life.  And therefore Community of Property, 50:50 was the only way to go.  Why on earth would you possibly be drawing up a contract for the end of your marriage when it hadn’t yet begun.

My friend I was chatting to today comes from a different country, and her comment was “in my culture, it’s felt that you must be hiding something if you get married with an ante nuptial contract – it’s very frowned upon”.

I totally understand all of those feelings, but I want to deeply explain the implications of both ways of getting married

Community of Property

Pro’s of C.o.P

Where Community of Property is great is that it means you get half of everything in a divorce.

What totally baffles me is how, women in particular, accept a divorce settlement of less than half when the law is very clear.  You are ENTITLED to half.  And both of you agreed to that when you agreed to get married in Community of Property.

One of the reasons this does happen is that he’s the primary breadwinner, all the money is in his name, and when going through a divorce, he strings it out for so long (because he can afford the lawyer’s costs and she can’t) that she eventually gives up.

But, legally, you’re entitled to half of everything.

As an aside, when you die, the first thing that happens is your assets get split in two.  The will then governs what happens to your share.  So if the husband dies, the wife gets half first, and then the will governs what happens to his half.  So even if he gives it to someone else, she’s still entitled to half first.

Con’s of Community of Property

The problem with community of property is that when it comes to assets and liabilities (the things you own and the money you owe), you are one legal entity.  You are joined or communed with respect to your property.

On the one hand, it’s a pain.  Banks and companies are getting more and more strict on this, as technically, you can’t sign a contract for anything without both of you co-signing.  Because if your husband wracks up a huge bill, you are liable for it.  So the bank wants to know you are ok with this loan or contract.  I think this is going to become more and more strictly enforced going forward.

The biggest issue I have with this is the issue of creditors.  If your husband’s company goes bankrupt, they can come after your assets, and if yours goes bankrupt, they can come after his.

Truly, the only way to protect assets when you are married in community of property is to put them in a trust from the beginning.

At university, we discussed in detail a precedent setting legal case where, because the husband had already gone bankrupt, when they could buy a new house, they put it in a trust.  Ten years later, he went bankrupt again, and the creditors went after the primary residence in the trust.  The judge held that it was good financial planning and not a scam to hide assets because it had been set up at a time when no bankruptcy was in sight.

Ante Nuptial Contract

As I said, the only time an Ante Nuptial Contract can be done is before you are married.

Pro’s

The biggest pro of an Ante Nuptial Contract is that you remain two legal entities when it comes to your asset, which is a great protection if one of you go bankrupt.

In addition, in South Africa, we have a variance called an ANC with Accrual – which basically means that everything accrued in the marriage is automatically split 50:50 on death or divorce.

So, it has the same benefit as being married in Community of Property in terms of sharing everything at the end.

Con’s

The red-light warning is a straight Ante Nuptial Contract with NO reference to a 50:50 split of assets on death or divorce.

It upsets me beyond belief when I see these contracts as they are usually put together by the primary breadwinner, and the spouse to be happily signs them.  She stays at home and gives up her career to look after the kids and then ends up broke and unemployable after 20 years of marriage and no job.

Be very clear on how you are married, as it strongly impacts how your assets will be impacted by creditors, death and divorce.

I really implore you that if you know a person who is considering getting married, please send them this episode so that they can make an informed decision that will impact their lives in such a significant way.

I’m Lisa Linfield, and this is Working Women’s Wealth.  Have  a great day.