Protect property when getting married

When it comes to property, it pays to do proper estate planning and draw up the right agreements when you get married.Cape Town lawyer, Ulrik Strandvik of Grant Gunston Attorneys, says when couples get married, there is often a strong feeling that to draw up an ante-nuptial contract reflects a lack of trust and commitment.

“This is understandable because the ante-nuptial contract is specifically designed to cope with possible negative outcomes down the line, such as death or divorce.”

This perception, says Strandvik, should be put aside because in reality an ante-nuptial contract is in most ways more equitable and preferable to being married in community of property – and it facilitates estate planning.

“In SA law, where an ante-nuptial contract is not entered into the total assets of both parties automatically become jointly held – and this includes any fixed property owned by one of the parties. This is called a marriage in community of property.

“In theory, under the community of property arrangement, no one party can transact directly in such a way as to affect the couple’s assets without the permission of the other party. But if one party enters into business deals which result in unpaid debt, the creditors can lawfully seize the jointly held assets.”

The effects of this, said Strandvik, have on occasions been disastrous for the “innocent” spouse.

This being the case, why does everyone not use the ante-nuptial contract?

According to Strandvik, apart from the misconception that it implies an unwelcome distrust at the outset of the marriage, the ante-nuptial system previously (before 1984) had the big disadvantage that one partner could increase his or her assets by large sums and then exit the marriage taking them all with him.

“Typically, a businessman could build up a small empire in his own name and then leave the wife with nothing except what she brought to the marriage. In many of these cases, the home would also be in the name of the husband. Long, expensive divorce proceedings would then have to get a more equitable settlement and all too often one party was able to hide certain assets.”

That situation, said Strandvik, was totally remedied by the introduction in 1984 of what is known as the accrual system.

“Under this system, in the event of a divorce each party holds onto the assets they brought to the marriage but any assets, including properties acquired after the marriage, go into a joint pool and are divided equally between the two parties or their heirs.

“If, for example, the spouse A has built up assets of R2m and spouse B has only R1m, the difference between them would be split 50/50 – so that each would end up with R1,5m, i.e. half the assets accrued since marriage.”

Describing this as a “brilliant” arrangement, Strandvik said that it eliminates the previous major objection to ante-nuptial contracts.

“It has proved highly effective in SA and strengthens the factors in favour of ante-nuptial contracts.”

In good estate planning, he added, it makes excellent sense to put some income earning assets such as rental producing properties in the name of the spouse who earns nothing or little, thereby reducing the income tax paid by the spouse earning the larger sums.

“It is surprising how often this logical step is not taken.”For more information contact Ulrik Strandvik on 021 702 7763.

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How to manage your credit score and buy property

Weak economic conditions, higher interest rates and the global credit crisis have forced banks to be far more picky about who they will lend money and less generous with their lending rates.

But Mary Jane Lefevre, said that before you apply for a home loan, there are steps you can take to improve your credit status and encourage lenders to look more favourably on your application.

“Even those who know that they have a good credit history should request a copy of their credit record from ITC and Experian (contact details for these can be found on the web) to ensure that all information held on you is both accurate and up to date,” says Lefevre. “You can also approach an origination company such as Mortgage Plus who will, with your written consent, provide you with your credit records.”

Be aware that each time your credit record is accessed; it affects your overall credit score at the bank. Therefore don’t allow everyone and anyone to access your credit record.

• Sever old relationships

When you apply for credit, it isn’t just your details the potential lender will scour. They will also check the credit history of your spouse (if you are married in Community of Property) or any co applicant or surety you may apply with. Joint bank accounts, if not conducted correctly could have an adverse affect on your application and if you are divorced or separated, make sure you are not linked to any debt or open credit facility with your ex.

• Cancel out of date credit cards

Many people switch credit cards frequently but fail to cancel old agreements even if they no longer use the credit or retail card, these lines of credit will still appear on your file, which can make lenders wary about the potential size of your total debt – some may fear that you will “max out” these cards and then struggle to meet repayments. If you don’t need the full credit limit given on a card, ask your lender to reduce it. The same applies to retail credit.

• Build a track record

Banks want to see that you have a record of managing credit sensibly. So if you are a first-time buyer consider taking out a credit card six months before making your bond application. Of course, you’ll need to make sure that you pay off the balance in full each month, and on time, to avoid interest payments and to show that you are diligent with managing your debt.  Also, make sure your income is deposited monthly into a bank account as the banks will ask for proof of income via your bank statements.

• Ensure details are the truth

Make sure that information you provide on applications is accurate and truthful. Inconsistencies can have a negative effect on your credit score and you must be able to prove any income that you have declared.

• Include additional information

Where necessary, add further information about previous credit problems. If such problems were after redundancy or divorce, for example, and your financial situation has since improved, you can add a note explaining this. Likewise, if you have been a victim of identity fraud in the past, make sure that any credit problems caused by this are removed from your file.  Always keep proof of paying up any arrear debt and rescind judgments.  Companies such as ooba can help through services such as oobaassist, which will assist you through the process of clearing any negative credit records.

• Before you put in an offer, get pre-qualified

Even if you only plan to buy a property in six months time, start talking to a reputable bond originator like Mortgage Plus who is able to help you with any potential problem as well as prequalifying you on income less expenses and deductions. Mortgage Plus Bond Originators will also have solutions to any potential problems facing you in a tougher credit environment.

To get pre-qualified – Click Here