The Antenuptial Contract is one of the most important documents that a person will sign in his or her lifetime, that is if you opt to get married. How exactly does it it work?
The problem, however, is that many women somehow disregard the importance of the antenuptial contract and many embark on a divorce without due cognizance of the repercussions that might follow at a later stage, especially when the marriage end in divorce. Somehow many people merely see the antenuptial contract as a mere formality, something that needs to be signed prior to the wedding day, without realising the consequences of such an important legal instrument.
No one goes into a marriage contemplating a divorce but when you consider that the antenuptial contract governs what will happen to your assets and liabilities on divorce or death, it makes lots of sense that considerable thought should be given to concluding it and that its contents should be fully understood by all parties concerned. Unfortunately, many people are more drawn into the eyes of their spouse prior to the marriage than to the importance of the wording of a proper antenuptial contract.
Marriage in Community of Property
Where you did not conclude an antenuptial contract prior to your wedding day, you will automatically marry in community of property. ‘In community of property’ means that everything the couple own, and their debts, from before their marriage are put together in a joint estate. And everything they earn or buy after their marriage is also part of this joint estate. Any money or possessions belonging to either of the spouses at the time of the marriage, or acquired by them at any time thereafter, cease to be the private property of the one person and become part of a joint estate in which each of the partners has an equal, undivided share.
On termination of the marriage, the husband and wife are each entitled to a half-share of the joint estate and they are jointly liable for any liabilities. A major disadvantage is that if one partner becomes insolvent, the other is protected only if he or she owns property that does not form part of the joint estate. Everything in the joint estate will be attached and sold off to pay any creditors.
Marriage out of Community of Property
Each spouse retains his or her own assets and liabilities whether acquired before or during marriage. There is no sharing of profits and losses. Both spouses have full and independent contractual capacity. Upon death or divorce, each spouse keeps control over their own assets.
This clearly gives parties absolute independence of contractual capacity and protects the estates of each party against claims by the other party’s creditors. There is no provision for any sharing whatsoever. A party who contributed to the other party’s estate whether in cash or otherwise would have a heavy onus to prove that he or she was entitled to anything from that party’s estate on dissolution of the marriage.
Where one party stays at home to raise children and does not contribute financially towards the marriage and the other spouse works and accumulates assets, the former may find herself with nothing and no claim to the assets of the latter.
The marriage is governed by a contract known as an ante nuptial contract which is concluded by the parties before the marriage. If the marriage occurred after 1 November 1984, the contract had to specifically exclude the system of accrual. In the absence of this exclusion the rules of accrual will automatically apply.
Antenuptial Contract With Accrual
In most cases the accrual system is, perhaps, the fairest marriage system for the majority of couples. Before the introduction of the accrual system in 1984, if prospective spouses chose to be married out of community of property, there was no form of sharing between them of what was built up during the marriage. The accrual system was introduced to remedy this.
The Matrimonial Property Act 88 of 1984 brought with it the “accrual” system which permits a form of sharing, consistent with a primary objective of marriage, but permitting retention of each party’s independence of contract and ability to retain their own unique separate estates.
“Accrual” means increase. The accrual system is a form of sharing of the assets that are built up during the marriage. The underlying philosophy in respect of the accrual system is that each party is entitled to take out the asset value that he or she brought into the marriage, and then they share what they have built up together. One spouse’s property cannot be sold to pay the other’s creditors if the other becomes insolvent – in contrast to the case where the parties are married in community of property.
It is of utmost importance that a party wishing to enter into an Ante Nuptial Contract must fully understand what it is they are signing. It is for this reason that a standard form contract cannot be used, that consultations cannot be held over the phone or by means of email and that, unfortunately.
The important features of an accrual marriage are in essence the following:
Each party retains his or her own estate. Each party may accumulate assets and incur liabilities without interference from or assistance of the other spouse. The estate of each party is determinable separately.
The monetary value of the smaller estate is subtracted from the monetary value of the larger estate, the difference is split, and the party having the larger estate pays half of the difference between the two estates to the party with the smaller estate.
At dissolution of the marriage, the estate of each party is calculated by listing all assets, listing all liabilities, subtracting liabilities from assets and arriving at a net asset value.
In practical terms this amounts to a similar division to a marriage in community of property. However there are certain crucial factors of an accrual marriage which add complexity and much more freedom of choice.
When drafting the Ante Nuptial Contract, the parties can each decide to exclude certain assets. The effect of excluding an asset will be that it does not feature on the asset statement at dissolution of the marriage and is completely excluded from the calculation. Assets which are not properly described can cause huge problems when the executor or the divorce attorney tries to decide what to do with it in calculating the net accrual value.
To exclude either a specific asset, or a commencement value, or both (which must be separate and not derived from the same asset), can effectively ensure that couples share only what they choose to share and keep separate any item or items, or values, which they do not believe it fair to share (for example something acquired before the relationship commenced).
Parties not wishing to exclude specific assets may exclude a certain sum of money which is the agreed equivalent of assets which they do not wish to share, and which is termed a “commencement value”.
Excluded from the Accrual
Certain property belonging to either the husband or the wife may not be taken into account when the accruals are worked out:
Any damages awarded to either spouse for defamation or for pain and suffering;
Any inheritances, legacies or gifts that either spouse has received during the marriage, unless the parties have agreed in their antenuptial contract to include these or the donor has stipulated their inclusion; A donation made by one spouse to the other. This is not taken into account as part of either the giver’s or the receiver’s estate, with the result that the giver cannot recover part of what he or she gave and the receiver need not return any of it.
Calculating the Accrual
The accrual is calculated by subtracting the net asset value of his/her estate at the commencement of marriage from the net asset value of his/her estate at dissolution of the marriage.
If spouse C had a net asset value of R10 000.00 at the commencement of the marriage (his/her “initial value”) and a net asset value of R100 000.00 at dissolution of marriage (his/her “end value”) then the accrual to his/her estate is R90 000.00. If the initial value of the other spouse B was R20 000.00 and hi/her end value R200 000.00, it follows that the accrual to his/her estate is R180 000.00.
Net accrual is calculated by subtracting the “smaller” accrual from the “larger” accrual. In the above example: R180 000-00 – R90 000-00 = R90 000-00. In accordance with the Act, C (the spouse with the smaller accrual) acquires a claim against B (the spouse with the larger accrual) for one half of the net accrual, namely – R45 000.00.
If you do intend to get married, it is well worth your while to consult a reputable attorney, to discuss your particular requirements and ensure that you fully understand the application of the accrual system to your particular situation.
An Antenuptial Contract must be signed before the marriage and must be signed in the presence of a notary and two competent witnesses. The notary will then register the contract in the local registry of deeds. If parties wish to conclude an Antenuptial Contract after their marriage it is necessary to launch an application to the High Court.
Need An Antenuptial Contract Template To Get You Started?
About the Author
Bertus Preller is a director and co-founder of Divorce Attorney (DA). He was admitted as an Attorney of the High Court in 1989. Prior to co-founding DA, Bertus was Managing Director and co-founder of Van Wyk & Preller Attorneys in Bloemfontein, a director of Honey & Partners Attorneys in Cape Town and founder of technology companies SmartSurv Wireless, DigiWords, CellBook, eSplash and eLaw initiatives such as eDivorce, eWills and eTrust. Bertus was also a past Part Time Commissioner at the CCMA an Arbitrator and Mediator at various Bargaining Councils, an Appeals Authority for the South African Police Services and he acted in a number of high profile matters in all Courts in South Africa. Bertus also negotiated the contracts of rugby players on behalf of the SARFU Rugby unions and more recently advised a number of South African Book Publishers on the Google Book Settlement. Bertus matriculated at Grey College in Bloemfontein and graduated from the University of the Orange Free State in 1988 (cum laude – Criminal Procedure) he articled at Symington & De Kok Attorneys in Bloemfontein. Bertus specializes in Family Law issues, such as, access, adoption, biological fathers’ rights, grandparent’s rights, divorce (uncontested & contested), divorcemediation, divorcing a missing spouse, same-sex and other non-marital life partnership agreements, parenting plans, maintenance and antenuptial agreements.