Arguing for life insurance as part of the joint estate 

By Dr Rika van Zyl CFP®, FPSA®, TEP 

On the issue of dealing with a life policy (with no nominated beneficiary) at death in a marriage in community of property, there are two schools of thought. Some would accept the case law which states that such a policy does not form part of the couple’s joint estate. Numerous authors of textbooks and articles argue, however, that life policies do form part of the joint estate. The results can have drastic consequences for the spouse in getting half of the proceeds of the policy or perhaps not seeing a cent of it. 

Not an exclusion

In terms of family law, a merging of estates takes place in a marriage in community of property upon marriage into one joint estate that includes all property and debts where the spouse becomes co-owners on an undivided and indivisible half share. Although it is not common, there may be a separate estate of the spouses of property that does not fall into the joint estate (governed by legislation) if, for example, an inheritance was received where the will expressly provides that it should not form part of the joint estate, or delictual damages is paid to one spouse. Life policies are not listed as an exclusion in the Matrimonial Property Act. 

Real obligations

In an insurance contract, the insurer undertakes the risk of death, in return for a premium, to render the insured a sum of money on the happening of death. In the law of contract, death is seen as a time clause (not a condition as death is certain to happen, just not when). The insured has the obligation to pay the premium and has the concomitant right to the proceeds at death. Even though the enforcement of the payment of the proceeds is postponed, the rights (also to name a beneficiary, to cede etc.) already vest at the conclusion of the contract. It is therefore the policyholder’s asset at the conclusion of the contract and should fall into the joint estate of persons married in community of property, as it is not excluded by legislation. The premium will consequently also be paid out of the joint estate.  

Previous court cases

Despite these legal rules, recent case law hangs on to an argument made in Hees NO v Southern Life Association Ltd 2000 (1) SA 943 (W) and Danielz NO v De Wet 2009 (6) SA 42 (C) that the policy proceeds do not fall into the estate because the proceeds are only paid after death and does not exist prior to death. They argue that there is supposed to be a separation of rights in the policy and the entitlement of the proceeds. The court concludes in Maqubela v the Master 2022 (6) SA 408 (GJ) (also relied on in Naidoo v Discovery Life Ltd 2018 ZASCA 88) that the proceeds never formed part of the joint estate.   

The arguments made in these cases cannot be supported based on the legal principles and foundations explained above, and there is a great need for courts to reinvestigate whether life policies are in fact part of the joint estate.