A negative effect the accrual system may have

by | 03.Feb.2016 | Estate Planning

Without proper estate planning, the consequences of the accrual system may leave your beneficiaries with a lifetime of hardship.  This article explains a negative consequence the accrual system may have at death. The accrual system explained The purpose of the accrual system is to create fairness between spouses, especially in the old traditional homes where the wife is running the household, allowing her husband to build up wealth and to support the family as a whole. This is accomplished by, on the dissolution of the marriage (in this case by death ), dividing the value of the assets obtained during the marriage in equal shares between them.  This means that the husband and wife will share equally in the profits of their marriage. So what can go wrong? Unfortunately, the same system that was implemented to create fairness (as seen above), can in some circumstances also have negative consequences that might not be fair to the remaining spouse, for instance where a spouse dies insolvent (assets are less than liabilities). Should your spouse die, leaving behind only liabilities, his estate will have a claim against you, being the surviving spouse, for half a share of your estate value due to the consequences of the accrual system.  So in the midst of your grief and shock at the loss of your spouse, you may find that not only do you no longer have a source of income (spouses’ salary), but you will also have to pay in an amount of money to cover estate debts.  It may mean that you will have to take out a bond on your property...