Spousal Donations: Good Intentions, Legal Consequences

Antenuptial contracts are commonly used to govern the financial consequences of a marriage. One option available to spouses is the inclusion of a donation clause, allowing one spouse to donate assets to the other. While spousal donations are legal and often tax-efficient, they require careful legal execution to avoid unintended consequences.

What Is a Spousal Donation?

A spousal donation occurs when one spouse donates assets to the other through an antenuptial contract concluded before marriage. These assets may include money, movable property such as vehicles or shares, or immovable property such as land or a residential home. Donations between spouses are exempt from donations tax, which makes them attractive from a financial planning perspective.

It is important to note that recording a donation in an antenuptial contract does not automatically result in a transfer of ownership, particularly where immovable property is involved.

When Does Ownership Transfer?

In South African law, ownership of immovable property passes only once the transfer is registered in the Deeds Office. Until registration takes place, the donating spouse remains the legal owner of the property, regardless of what is recorded in the antenuptial contract.

An unregistered spousal donation therefore gives the recipient spouse a personal right against the donor, not a real right in the property. This distinction is critical and often misunderstood.

The Risks Associated With Unregistered Donations

Where transfer of a donated property has not yet been registered, the donating spouse retains the power to sell or transfer the property to a third party. A third-party purchaser who acquires and registers the property in good faith will obtain valid ownership, leaving the recipient spouse with a potential claim for damages only.

If the donating spouse dies before registration of transfer, the property forms part of the deceased estate and must be administered accordingly. This can result in delays, uncertainty, and possible estate duty implications, depending on the value of the estate.

Managing and Reducing Risk

The most effective way to protect a spousal donation of immovable property is to register the transfer as soon as possible in the Deeds Office. Once registered, ownership is secure and enforceable against third parties.

Where immediate registration is not possible, a caveat may be noted against the property to prevent transfer without the consent of the recipient spouse. While contractual protections in the antenuptial contract are important, they only bind the spouses and do not offer protection against third parties.

Can a Spousal Donation Be Reversed?

A spousal donation may be cancelled by mutual agreement, provided the cancellation is properly recorded, and in the case of immovable property, noted in the Deeds Office. A court may also set aside a donation on recognised legal grounds such as fraud, failure of a condition attached to the donation, or serious misconduct. Courts approach such applications cautiously and will not readily interfere with a valid donation.

Estate Planning Considerations

Spousal donations should be aligned with estate planning strategies. An unregistered donation cannot be effectively dealt with in a will, as ownership has not yet passed. Wills should therefore be carefully drafted to account for the possibility that registration may not have occurred at the time of death.

Conclusion

Spousal donations are often made with the best of intentions, but intention alone does not transfer ownership. It is important to remember that until the transfer of immovable property is registered, legal control remains with the donor, and the risks associated with sale, death, or disputes persist. A well-drafted antenuptial contract lays the foundation, but it is registration and proper legal follow-through that give effect to the parties’ intentions. Understanding these legal consequences early can prevent uncertainty and protect both spouses in the long term.

Written by: Maret Carroll
Moderated and approved by: Rohula Kgabu

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