Understanding the full community of property

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In the case of CM v EM it was held in the Supreme Court of Appeal of South Africa (“SCA”), case number 10861/2018, that:

“The value of the Respondent’s right to future annuity payments in respect of Personal Portfolio Living Annuities (“the living annuities”) from Glacier Financial Solutions (Pty) Ltd, a member of the Sanlam Group, is an asset in his estate for purposes of calculating the accrual of his estate”.

Prior to the judgement, a party to a divorce, wherein the parties are married out of community of property and subject to the accrual system held no claim in regard to the other party’s living annuities; because it did not form part of any accrual calculation. That is however no longer the case.

The court, in reaching its decision, referred to the case of De Kock v Jackson and another 1999 (4) SA 346, where it was concluded that there was no logical or legal reason why both the cash component and the accrued right to the pension should not form part of the community of property existing between the parties prior to the divorce.

The court’s reasoning behind the decision was that the Respondent in this matter had a clear right to the investment returns yielded by his capital reinvestment with Sanlam, in the form of future annuity income which he draws from the agreement. The court, therefore, found that such annuity income is an asset which can be calculated for purposes of determining the accrual.

The brief background to the matter was the following: The parties married in December 1999, out of community of property and subject to the accrual system as defined in the Matrimonial Property Act 88 of 1984. In July 2008, the Respondent used a portion of his pension benefit, which arose from his employment, to purchase a Personal Living Portfolio Living Annuity from Glacier Financial Solutions. In March 2017, he used the remainder of the proceeds of his pension benefit to make another purchase with Glacier.

The SCA has not provided a guideline as to how the calculation should be done and this could lead to further litigation. In future divorce proceedings, where the value of the party’s claim in respect of a living annuity is disputed between the parties, an expert will have to be appointed to determine the value.

Reference List:

  • CM v EM (1086/2018) [2020] ZASCA 48.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)