Out of Community of Property with Accrual Meaning

“Out of community of property with accrual” is a type of marital property regime used in South Africa that determines how assets and liabilities are handled between spouses during their marriage and in the event of a divorce or the death of a spouse.

Breaking Down the Meaning:

1. Out of Community of Property:
   • Under this regime, each spouse retains their own assets and liabilities separately. This means that the assets and debts each person brings into the marriage, as well as those acquired individually during the marriage, remain their own.
   • There is no joint estate, meaning that there is no pooling together of assets and debts as in a marriage “in community of property.”
2. With Accrual:
   • The “accrual” system refers to the growth or increase in the value of each spouse’s estate during the marriage. While the spouses’ estates are separate during the marriage, the accrual system kicks in upon divorce or the death of one spouse.
   • The accrual calculation determines how much each spouse’s estate has grown during the marriage. The spouse whose estate has grown more (i.e., has a higher accrual) is required to share the difference with the other spouse.

How the Accrual System Works:

• Initial Values: When a couple marries out of community of property with accrual, each spouse’s estate is given an initial value. This includes the assets they own at the time of marriage.
• Exclusions: Certain assets can be excluded from the accrual calculation, such as inheritances, donations between spouses, or assets that were explicitly excluded by agreement.
• During the Marriage: Throughout the marriage, each spouse continues to manage their own estate. They can acquire assets, incur debts, and make financial decisions independently.
• At the End of the Marriage (Divorce or Death): The accrual system is triggered. The growth of each spouse’s estate is calculated by comparing the initial value at the time of marriage to the value at the time of divorce or death. The spouse with the larger growth (accrual) must pay half of the difference to the spouse with the smaller accrual, ensuring that both parties benefit from the wealth accumulated during the marriage.

Example:

• Spouse A has an estate worth R500,000 at the time of marriage, and it grows to R1,500,000 by the time of divorce.
• Spouse B has an estate worth R300,000 at the time of marriage, and it grows to R700,000 by the time of divorce.
  • Accrual Calculation:
    • Spouse A’s estate grew by R1,000,000 (R1,500,000 – R500,000).
    • Spouse B’s estate grew by R400,000 (R700,000 – R300,000).
    • The difference in accrual is R600,000. Spouse A would then have to pay Spouse B half of that difference, which is R300,000, to equalize the accrual.

Why Couples Choose This Regime:

• Financial Independence: Each spouse retains control over their own financial affairs and is not liable for the other spouse’s debts.
• Fair Distribution: The accrual system ensures that both parties benefit from the wealth accumulated during the marriage, even if one spouse earns significantly more than the other.
• Protection: It provides a balance between total separation of estates and complete sharing of assets, protecting both parties’ interests in the event of divorce or death.

Conclusion:

The “out of community of property with accrual” regime offers a balanced approach to marriage, combining financial independence with a fair method of sharing wealth accumulated during the marriage. This regime is particularly popular among couples who wish to maintain separate estates while ensuring that both parties benefit from the marriage’s financial growth.