1. Compiled by: Lize de la Harpe, Legal Advisor: Glacier by Sanlam
This publication is intended for use by intermediaries.
One of the ordinary consequences of a marriage in community of property is that both parties have an equal share in
the assets which form part of the joint estate. What is, however, not always properly understood is exactly what
constitutes an asset in the joint estate. This is of particular importance when the joint estate is dissolved as a result of
the death of either of the spouses.
In this edition we will look at the legislation that prescribes the treatment of fund death benefits and the impact thereof
on the joint estate.
When married in community of property, a joint estate is created. Each spouse owns half of an undivided share in all
assets in such joint estate.
Upon the death of either spouse the joint estate terminates ex lege (i.e. by operation of law). The Administration of
Estates Act No. 66 of 1965 makes provision for the appointment of an executor (subject to certain exceptions) who will
be responsible for winding up the joint estate.
The executor will take possession of the entire joint estate, pay all joint debts, pay half of the net estate to the
surviving spouse and then distribute the remainder to the heirs according to the will of the deceased or in accordance
with the law of intestate succession (if the deceased died without leaving a valid will).

2. When a member of a retirement fund dies before reaching retirement age (and if the rules of the particular fund
permits) the lump sum benefit which becomes payable (hereinafter referred to as the “death benefit”) must be paid to
the member’s dependants and/or nominees.
Section 37C of the Pension Funds Act No. 24 of 1956 regulates the payment of death benefits. The primary objective
of section 37C is to ensure that those persons who were dependant on the deceased member are not left destitute
after his/her death, irrespective of whether or not the deceased was legally required to maintain them.
Section 37C imposes three primary duties on the board of trustees, namely to:
1. Identify and trace “dependants” (as defined in section 1 of the act) and those persons, if any, who have
been nominated by the deceased member;
2. Make benefit allocations on a fair and equitable basis; and
3. Determine an appropriate mode of payment of the death benefit.
Section 37C(1) specifically provides that regardless of the provisions of any other law, including the common law, and
notwithstanding the rules of a registered fund, all death benefits payable by a fund upon the death of a member shall
not form part of the assets in the estate of such member, but shall be dealt with in terms of the scheme outlined in the
said section.
It reads as follows:
“37C(1) Notwithstanding anything to the contrary contained in any law or in the rules of a registered fund, any
benefit (other than a benefit payable as a pension to the spouse or child of the member in terms of the rules of
a registered fund, which must be dealt with in terms of such rules) payable by such a fund upon the death of a
member, shall, subject to a pledge in accordance with section 19(5)(b)(i) and subject to the provisions of
sections 37A (3) and 37D, not form part of the assets in the estate of such a member, but shall be dealt with in
the following manner:”
(my emphasis)
The introductory words of this section make it clear that the legislature intended the regulation of death benefits (as
set out in this section) to override all else, including all other laws.
The effect of sub-section (1) can thus be summarised as follows:
i. death benefits do not form part of the deceased estate of the member (other than in the limited exceptions
set out in the section);
ii. the member’s freedom of testation is limited;
iii. the law of intestate succession does not apply; and lastly
iv. death benefits are not subject to the law of marriages, i.e. they do not form part of the joint estate of
spouses married in community of property.
In Makume v Cape Joint Retirement Fund & another [2007] JOL 19999 (C) the deceased husband of the applicant
was a member of the Cape Joint Retirement Fund. Together they had three minor children. Upon the death of the
deceased, the fund found that the deceased had a partner (the second respondent) and that a minor child existed
from that relationship. The fund accordingly split the benefit amongst the applicant and her three children and the

3. second respondent and her child. Challenging the allocation of the death benefit, the applicant disputed that the
second respondent and her child were dependants of the deceased.
One of the questions the court had to decide on was whether the applicant was entitled to 50% of the deceased
member spouse’s death benefit by virtue of her marriage in community of property to the deceased.
The court held that the death benefit has nothing to do with whether the deceased was married in or out of community
of property – section 37C was intended by the legislature to have the effect that any benefit will not fall into the estate
of the deceased member. The court placed heavy emphasis on the introductory words of sub-section 37C(1) (as
quoted above) and held that not even the common law rules relating to the proprietary rights of spouses married in
community of property can override the application of section 37C.
Therefore, the applicant was not entitled to 50% of the proceeds of the death benefit by virtue of their marital regime -
the application was accordingly dismissed.
In the matter of Kaplan and another NNO v Professional and Executive Retirement Fund and others [1999] 3 SA 798
(SCA) the Supreme Court of Appeal confirmed that section 37C was intended by the legislature to have the effect that
any benefit will not fall into the estate of the deceased member (save for the expressly provided exceptional cases as
set out in this section) and that this is to occur notwithstanding any other rule or law and that it should be strictly dealt
with in the manner as set out in that section.
The SCA accordingly held that all death benefits payable in respect of a deceased member, whether subject to a
nomination or not, must thus be dealt with in terms of one or other of the subparagraphs of section 37C – in other
words, none fall into the estate save in the circumstances stated in sub-paragraphs (b) and (c) of this section.
In the recent matter of Collatz v Johnson & Johnson Provident Fund and others [2013] JOL 30752 (PFA) the late
husband of the complainant was, during his employment, a member of the first respondent’s pension fund by virtue of
such employment. When the deceased’s employment was terminated he ceased to be a member of the fund. He then
became entitled to a withdrawal benefit from the fund. He had a choice either to receive a cash payment or transfer
his benefit to a pension fund of his choice in terms of the fund’s rules. At that time, the deceased and the complainant
were engaged in divorce proceedings. They agreed that the benefit should be preserved pending the finalisation of
the divorce proceedings. The deceased passed away in June 2010. At the time of his death, the divorce had not been
finalised.
The essence of the complaint was that since the complainant was married in community of property with the
deceased and, in terms of the Matrimonial Property Act 88 of 1984, upon the deceased’s exit from the fund a benefit
accrued to the joint estate and therefore the complainant ought to have been consulted prior to the transfer of the
benefit to the third respondent. The benefit should have been preserved for the purpose of the pending divorce
proceedings. The complainant stated that the third respondent should not apply the provisions of section 37C when
paying the deceased’s benefit and instead the full amount should be paid to her since it forms part of the joint estate.
The Adjudicator held that the trustees of a pension fund can only do what is set forth in the rules and the law. The
benefits payable upon the death of the deceased, prior to the finalisation of the divorce proceedings, do not form part
of his estate. Therefore, the board of trustees was correct in distributing the death benefit in terms of the provisions of
section 37C. The complaint was accordingly dismissed.
The wording of section 37C(1) as quoted above makes it clear that the legislature intended its regulation of the
payment of death benefits to override all else. The words "notwithstanding anything... in any law" override all other
laws, including the common law – it accordingly follows that not even the common law rules relating to the proprietary
rights of spouses married in community of property can override this section.
The payment of death benefits is therefore exclusively regulated by section 37C of the Pension Funds Act - meaning
that death benefits will not fall into the joint estate of the member. This also ties up with the primary objective of

4. section 37C, being to ensure that those persons who were dependant on the deceased member are not left destitute
after his/her death, irrespective of whether or not the deceased was legally required to maintain them.