What couples must know about community of property and estate planning

In a marriage in community of property, both spouses jointly own a single estate in equal, undivided shares. However, what many couples fail to consider is that the death of one spouse triggers the winding-up of the entire joint estate. This process can have far-reaching—and sometimes unintended—financial consequences for the surviving spouse, especially where no proper estate plan is in place.

Winding up your joint estate

On the death of the first-dying spouse, the joint estate ceases to exist, and the appointed executor is legally required to wind it up in its entirety. This includes settling all liabilities in the estate, regardless of which spouse incurred the debt or whether it was acquired before or after the marriage. In other words, both spouses are jointly and severally liable for the debts of the estate, even if a specific debt was registered in only one name. Once debts are settled, the surviving spouse must formally claim their 50% share of the net estate, while the deceased’s remaining 50% is distributed to their heirs and beneficiaries. Problems can arise where the first-dying spouse dies heavily indebted or where assets are bequeathed in a way that conflicts with the surviving spouse’s financial needs.

Case study: Consider Mr and Mrs Dlamini, who are married in community of property. Their estate comprises a R2 million home and R3 million in unit trusts. Unknown to Mrs Dlamini, her husband owes R2 million to creditors due to a failed business venture. In his will, Mr Dlamini bequeaths his 50% share of the family home to his adult daughter from a previous relationship. Following his death, the executor must use the joint estate to settle Mr Dlamini’s debt, reducing the investment to R1 million. Mrs Dlamini is left with only a 50% share in the home, now co-owned with her stepdaughter, and diminished access to liquid assets. This case highlights how shared debt and poorly structured wills can place the surviving spouse in serious financial difficulty.

Note: For the sake of simplicity, we have excluded tax from these calculations

Executor’s fees, Master’s fees, and estate duty

As the executor is responsible for winding up the entire joint estate, all related fees- including the executor’s and Master’s fees- are calculated on the gross value of the joint estate. These fees are payable from the estate, except for funeral and administration costs tied to assets excluded from the joint estate (if any), which are settled from the deceased’s 50% share. It’s worth noting that if the deceased bequeath their 50% share to the surviving spouse, the assets could be subject to these fees again upon their passing. Having said that, couples can negotiate their executor’s fees in advance when drafting their wills. When it comes to estate duty, note that only the deceased’s 50% share of the net joint estate is considered when calculating the dutiable estate value, keeping in mind the applicable R3.5 million spousal abatement.

Capital gains and property transfer

For capital gains tax (CGT) purposes, the death of a spouse is treated as a disposal. If the surviving spouse inherits the deceased’s share of the estate, they are deemed to have acquired the assets at the same base cost, date, currency, and for the same purpose. CGT is therefore deferred until the surviving spouse disposes of the assets or passes away. Importantly, if immovable property is inherited by the surviving spouse either via a will or intestate succession, no transfer duty is payable.

Bank accounts and access to funds

A practical but often overlooked challenge is that the deceased’s bank accounts are typically frozen once the bank receives notice of death. If spouses share a bank account, the surviving spouse may lose access to much-needed funds, preventing debit orders from running and halting all transactions. While the executor may apply to the Master of the High Court to release funds for maintenance, this process can be slow, leaving the surviving spouse in a financially vulnerable position.

Claims by the surviving spouse

One of the legal consequences of marriage is that it gives rise to a duty of support between spouses. As such, where the first-dying spouse does not make adequate financial provision for the surviving spouse in terms of their will, the surviving spouse may bring a claim against the deceased’s estate in terms of the Maintenance of Surviving Spouses Act for the provision of reasonable maintenance needs, and such claim will enjoy the same preference as a maintenance claim from a child dependant.

Important planning considerations

Couples in a community of property marriage must remember that each is only entitled to bequeath their own 50% share of the net joint estate. A spouse cannot, through their will, remove or allocate assets that fall outside their half share, and attempting to do so can create legal conflict and delays in finalising the estate. Given the complexities involved, both partners must engage in transparent, thorough estate planning, taking into account debt exposure, liquidity needs, and provision for the surviving spouse.

Community of property marriages present unique estate planning challenges, and we recommend that couples engage in a transparent, comprehensive planning process to prevent complications in the event of death.

PERSONAL FINANCE