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How inheritances, legacies, donations and replacement assets are treated under South African matrimonial property law
In South African accrual marriages, inheritances are usually treated differently from ordinary growth in a spouse’s estate.
Section 5(1) of the Matrimonial Property Act 88 of 1984 provides that an inheritance, legacy or donation received during the marriage does not form part of the recipient spouse’s accrual, unless the spouses agreed otherwise in their antenuptial contract or the testator or donor stipulated otherwise.
The section also extends the exclusion to another asset acquired by virtue of the spouse’s possession or former possession of the inherited, bequeathed or donated property.
That sounds simple.
In practice, disputes often arise when inherited money has been used to buy another asset, mixed with ordinary funds, invested, moved through different accounts, used to reduce debt, introduced into a business, partially spent, or is no longer readily identifiable by the time of divorce.
The real question is often not whether the inheritance was originally excluded. It is whether the spouse can still identify and prove what happened to the inherited value.
This article provides general information about South African matrimonial property law. It does not constitute legal advice or predict the outcome of an individual matter.
| Question | General position |
Is an inheritance normally included in accrual? | No. Section 5(1) ordinarily excludes inheritances received during the marriage. |
Does the ANC have to exclude inheritances expressly? | Not necessarily. Section 5 already provides the statutory exclusion, unless the ANC provides otherwise. |
Can a will change the position? | Yes. The testator may stipulate otherwise. |
Can a donor change the position? | Yes. The donor may stipulate otherwise. |
What if inherited money buys another asset? | The replacement asset may also remain excluded if it was acquired by virtue of the inheritance. |
What if inherited money is mixed with other funds? | The analysis can become more difficult because tracing and proof may be required. |
What if the inheritance increases in value? | The treatment depends on the statutory wording, the ANC, the nature of the later value and the evidence. It should not be assumed that every form of later income or growth is automatically excluded. |
What if one spouse gives the other a gift? | Section 5(2) contains a separate rule for donations between spouses. |
Does this apply to marriages in community of property? | No. The accrual system is a different matrimonial property regime. |
The accrual system shares growth in the spouses’ respective estates when the marriage ends, but the Matrimonial Property Act expressly removes certain categories of property from that calculation.
Section 5 creates specific exclusions for inheritances, legacies and donations. The practical effect is that qualifying property received gratuitously from a third party is treated differently from ordinary growth in a spouse’s estate during the marriage.
That statutory protection can be important in divorces involving family wealth, inherited property, farms, investment portfolios, businesses, trusts and substantial assets.
Section 5(1) provides that an inheritance, legacy or donation that accrues to a spouse during the marriage does not form part of that spouse’s accrual.
The section goes further. It also excludes another asset acquired by virtue of the spouse’s possession or former possession of that inheritance, legacy or donation.
This second part is critical. The exclusion is therefore not necessarily lost merely because the original inherited asset is later replaced by another asset.
Not necessarily.
Section 5(1) already provides the statutory exclusion. An ANC does not have to repeat the section word for word for the exclusion to exist.
However, the spouses may agree differently in their ANC. The statute expressly allows them to alter the default position by agreement.
This is why the ANC must always be read carefully rather than relying only on a general understanding that “inheritances are excluded”. The actual wording may change the statutory position.
Yes.
Section 5(1) also provides that the testator may stipulate otherwise.
The wording of the will can therefore be relevant to the matrimonial-property consequences of the inheritance.
In practice, a proper review may require examination of the will, the liquidation and distribution account, executor records, transfer documents, bank records, valuations and the ANC.
The divorce analysis should not start and end with the statement: “I inherited it.” The legal and documentary history matters.
Assume one spouse inherits R3 million during the marriage.
If that R3 million remains identifiable in a separate account, the evidential position may be relatively straightforward.
The inheritance itself is ordinarily excluded under section 5(1). But many real cases are not that simple.
The money may later be invested, transferred, used as a property deposit, used to purchase shares, introduced into a business, used to repay a bond, combined with other funds or partly spent.
The question then becomes what happened to the inherited value.
Section 5(1) expressly refers to another asset acquired by virtue of the spouse’s possession or former possession of the inheritance, legacy or donation.
So if inherited money is used to acquire another identifiable asset, that replacement asset may also be excluded.
For example, a spouse inherits R2 million and uses it to buy an investment property. The fact that the original cash no longer exists does not automatically mean the statutory exclusion disappears.
The enquiry shifts to whether the new asset was acquired by virtue of the inheritance.
This is closely related to the tracing issue discussed in MVA’s article “Are Replacement Assets Excluded from Accrual in an ANC?”
This is where disputes become more difficult.
Assume a spouse inherits R1 million and deposits it into an account containing R800 000 of ordinary savings. The spouse later uses R1.5 million from that account to buy a property. How much of the property is attributable to the inheritance?
The answer may depend on the evidence.
Relevant material may include bank statements, dates of deposits, transfer records, purchase agreements, loan documents, investment statements and accounting records.
Where inherited and non-inherited funds are mixed, the question can become one of tracing and proof rather than simple ownership.
That is why inherited funds should ideally be documented carefully where the exclusion may later matter.
This can create a more complicated analysis.
Suppose inherited money is used to reduce the bond over a property that forms part of the spouse’s ordinary estate.
The inheritance has then improved the spouse’s net financial position, but the value is no longer sitting in a separate asset.
The correct treatment may depend on the source of the payment, the ownership of the property, whether the property itself is excluded or included, whether the inherited value can be traced into the increased equity, and the wording of the ANC.
It is unsafe simply to assume that because inherited cash was once used, the same nominal amount can automatically be deducted from the accrual years later. The legal and evidential chain must be analysed.
Inherited funds are sometimes introduced into a private company or business.
That can happen through a shareholder loan, a capital contribution, acquisition of shares, purchase of business assets or payment of business expenses.
This can create several separate questions: Was the inherited value converted into a shareholder loan? Did it acquire shares? Was the money simply absorbed into the company’s working capital? Can the inherited value still be traced? Has the business valuation already taken that value into account?
These questions matter especially in high-value and business-owner divorces. An inheritance does not become easier to analyse merely because it was invested in a company.
This requires care.
Section 5(1) expressly excludes the inheritance itself and another asset acquired by virtue of the inheritance.
But the statutory wording does not support a blanket assumption that every form of later income, profit, return or growth associated with inherited property is automatically excluded in every case.
The ANC may contain wider wording, for example referring expressly to proceeds, income, fruits, replacements, substituted assets or growth.
In ST v CT (1224/16) [2018] ZASCA 73; 2018 (5) SA 479 (SCA), the Supreme Court of Appeal recorded an ANC clause that expressly excluded capital or income received from a third party as an inheritance, legacy or donation.
The case illustrates why contractual wording may be wider than the basic statutory language.
The safer approach is to distinguish between the statutory exclusion, the wording of the ANC and the factual source of the later value.
Suppose a spouse inherits a property worth R4 million.
The inherited property itself is ordinarily excluded from accrual.
If it is later sold and the proceeds are used to buy another identifiable property, the replacement-asset provisions may become relevant.
If the property is rented out, however, the treatment of rental income should not simply be assumed. The ANC should be checked to see whether income, fruits or proceeds are expressly addressed.
This is particularly important where substantial rental income has accumulated over many years.
Inherited shares can create the same distinction.
The original shareholding may be excluded.
But questions can arise if additional shares are acquired later, rights issues occur, dividends are retained, shares are sold and replaced, the company restructures, the inherited interest is exchanged for another investment, or the shareholder receives new rights or benefits.
The legal analysis should identify what was inherited and what arose later.
A trust distribution is not automatically an inheritance for purposes of section 5(1).
The legal nature and source of the benefit matter. A beneficiary may receive capital, income, a discretionary distribution, a vested benefit, property from a testamentary trust or another trust benefit.
The label placed on the payment does not determine its matrimonial-property treatment. The trust deed, the source of the benefit and the legal basis on which the beneficiary received it may need to be examined.
This is an area where specialist trust and tax advice may also be necessary.
Section 5(1) does not deal only with inheritances.
It also excludes qualifying donations received from third parties during the marriage, unless the ANC or donor provides otherwise.
This may include substantial gifts from family members, including cash, property, shares, investments, vehicles or other gratuitous transfers.
The fact that the asset was not inherited through a deceased estate does not necessarily mean it falls into accrual.
Donations between spouses are dealt with separately.
Section 5(2) provides that a donation between spouses, other than a donation mortis causa, is not taken into account as part of the estate of either the donor or the donee for purposes of determining accrual.
The Supreme Court of Appeal in ST v CT specifically commented on the distinction between section 5(1) and section 5(2).
This can become technically important where large assets or sums of money have moved between spouses during the marriage.
Yes, in relation to section 5(1).
The statute expressly allows the spouses to agree otherwise in their ANC.
The ANC may therefore provide that certain inheritances or donations will form part of the accrual. Conversely, it may contain wording designed to protect inherited assets more broadly.
In B F v R F (2017/5018A) [2018] ZAGPJHC 699; 2019 (4) SA 145 (GJ), the Gauteng High Court described section 5 as creating special cases in which assets acquired after commencement of the marriage are excluded by operation of law.
The wording of the ANC should nevertheless be interpreted carefully.
Yes, potentially.
The statutory exclusion under section 5 applies to the accrual calculation. That does not necessarily mean an inheritance is irrelevant to every other matrimonial claim.
In Coetzer v Coetzer (7407/04) [2005] ZAWCHC 92, the court distinguished the section 5 accrual exclusion from the different enquiry involved in a redistribution claim under section 7(3) of the Divorce Act 70 of 1979.
The matrimonial property regime and the particular claim therefore matter. An inheritance excluded from accrual is not automatically legally irrelevant for every purpose.
In practice, a spouse who relies on section 5 should be prepared to establish the factual and legal basis for the exclusion, particularly where the source, amount or later use of the property is disputed.
A bare statement that “that money came from my family” may not resolve a dispute about whether the asset qualifies as an inheritance, legacy or donation, or what happened to it afterwards.
Evidence may include the will, executor correspondence, liquidation and distribution accounts, bank statements, proof of transfer, title deeds, share certificates, investment statements, trust records, loan accounts, purchase agreements and historic valuations.
The stronger the documentary chain, the easier it becomes to analyse whether the excluded value remains identifiable.
An inheritance received twenty years before divorce may have passed through multiple transactions.
If the spouse cannot show what became of it, applying the exclusion may become difficult in practice.
Good records should establish what was received, when it was received, its value, where it was deposited or transferred, what it was later used to acquire, and how any replacement asset can be linked back to the original inheritance.
This is particularly important in high-net-worth and complex financial divorce matters.
The correct analysis is usually more precise.
The earlier the source and movement of the inherited value are reconstructed, the easier it usually is to identify the real dispute.
Martin Vermaak Attorneys Inc. advises on South African matrimonial-property disputes involving antenuptial contracts, accrual calculations, excluded assets, inheritances, replacement assets, businesses and substantial estates.
Where an inheritance, legacy or donation may affect the accrual calculation, the enquiry should go beyond asking whether the asset was originally inherited.
The important questions are: What was received? What does the ANC say? Did the testator or donor stipulate anything different? What happened to the asset? Can any replacement property be traced? Has inherited value been mixed with other assets? Is income or later growth also in dispute? Can the exclusion be proved?
Those questions can materially affect the accrual calculation in a complex divorce.
If an inheritance or family donation is likely to affect a substantial accrual claim, obtain advice before settlement figures are agreed or financial positions are finalised.
For related guidance, see MVA’s articles on Marriages with Accrual in South Africa.
Author: Martin Vermaak, B.Proc, LLB
Attorney of the High Court of South Africa | Director, Martin Vermaak Attorneys | Over 20 years’ experience in divorce and family law
Disclaimer
This information has been prepared for general educational purposes only and is not intended to constitute legal, financial, tax or other professional advice. South African family law is fact-specific, and the applicable legal position may depend on the circumstances of the individual matter. Readers should obtain independent professional advice appropriate to their circumstances before making legal, financial or other decisions.
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