Why It Is Necessary To Have An Antenuptial Contract?
We understand the last thing you want to consider during exciting wedding preparations is what will happen in the case of a divorce, but, with more than four in 10 marriages in South Africa ending in divorce before the 10th wedding anniversary, it’s a topic that needs careful consideration. Here are the various options available to you in South Africa, as well why we recommend an Antenuptial Contract.
Three Matrimonial Property Regimes
South African law recognises three matrimonial property regimes, namely:
- Marriages In Community Of Property
- Marriages Out Of Community Of Property Without Accrual (Antenuptial Contract or ANC – without Accrual)
- Marriages Out Of Community Of Property With Accrual (Antenuptial Contract or ANC with Accrual)
In Community Of Property
This matrimonial property regime means that everything each individual spouse owns as well as each of their individual debts from before their marriage are put together in a jointly owned marriage estate. From this point onwards everything they earn or buy after their marriage forms part of this joint estate. This includes ALL debt and ALL liabilities incurred by either one of them. This matrimonial property regime is an old-fashioned and has proven to be inconvenient during a marriage as well in the case of a divorce. Characteristics of this contract:
Neither party has full contractual capacity. Written consent is therefore needed for certain contracts. This contract makes spouses running independent businesses a challenging task.
If one spouse becomes insolvent, the other spouse is automatically also insolvent. Should one spouse be reckless with his or her financial affairs in a marriage in community of property, it will adversely affect the other spouse, as they will be liable for each other’s debts.
The most prejudicial consequence of marrying in community of property, is that assets in the joint estate are vulnerable to the claims of creditors of both spouses and very little can be done to protect against this vulnerability.
The only real advantage of being married in community of property is that it is based on the fact that marriage is a partnership and as such it can be conducive to a harmonious marriage relationship as it promotes both legal and economic equality of the spouses with a fair 50/50 split.
In order for you and your spouse to get married out of community of property, you will need to enter into an ANC before the marriage is solemnised. Often referred to as a, Prenuptial Agreement or PreNup. There are two options when entering into an Antenuptial Contract. You can choose to do so with Accrual or without Accrual.
Out Of Community Of Property WITHOUT The Accrual System (ANC without Accrual)
The parties must sign an antenuptial contract (ANC) before they get married to apply this system. If this is not done then couples will automatically fall into a ‘In Community of Property’ contract. ANC allows both parties to retain their own estate (in other words, each party keeps his own assets and liabilities as their own).
If you do not want the accrual system to apply, it must specifically be excluded in the Antenuptial Contract. This achieves a complete separation of assets of spouses – not only those brought into the marriage but also those acquired during the marriage. Each spouse will retain ownership of completely separate estates.
There is no sharing and on dissolution of the marriage, neither spouse has any claim against the assets of the other. Similarly, neither spouse is liable for the debts of the other. In other words, there is no sharing of profit or loss and the court has no discretion whatsoever to adjust the division of assets on the basis of equity or fairness.
The advantages of this system is:
- Both parties have full contractual capacity and the one party is not liable for any debts of the other party.
- If one party becomes insolvent, only his/her estate is sequestrated for creditors to attach. The other party’s estate may not be touched.
- All inheritances and/or donations will remain the exclusive property of the person that received it.
Out Of Community Of Property WITH The Accrual System (ANC 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 correct this. It is applicable to all marriages out of community of property, unless the prospective spouses specifically exclude the accrual system in their contract.
The principals are exactly the same as explained above in the out of community of property without accrual. The only difference is at the dissolution of the marriage where the assets, which you have accrued during the marriage, are divided equally between the parties.
The same three benefits apply namely, you have full contractual capacity, only the insolvent person’s estate can be sequestrated and if you inherit or receive a donation it will remain your exclusive property. However, at the dissolution of the marriage, either through death or divorce, the estate which each spouse has built up during the marriage is combined and then equally divided.
This system is a combination of the above marriage in community of property and the marriage out of community of property. During the marriage you enjoy all the benefits of a marriage out of community of property where each party retains his or her own estate but at the dissolution of the marriage, all that you have both accrued during the marriage (no matter how much you have built up) is divided equally.
There are two important requirements for an antenuptial contract, namely that you must specify in the contract whether you own any existing assets which you wish to exclude from the proposed accrual. Secondly you must specify in the antenuptial contract, your existing assets and its value that you start off with in the marriage. At the dissolution of the marriage, this opening balance will be subtracted from the total nett balance which you have built up during the marriage, in order to determine the actual accrual.
What are the Most Common Reasons for Registering an Antenuptial Contract?
- They do not want to be held liable for any debts that the other spouse may have incurred prior to the marriage;
- They do not want to be held liable for any debts that the other spouse may incur during the marriage;
- They want to protect assets such as a house from creditors, particularly if one of the spouses has a business of his or her own, and they would therefore want to be able to register the house in the name of the other spouse;
- One or both spouses have assets at the time of the marriage that they don’t want to become part of a joint estate;
- They want to be able to enter into transactions without having to obtain the consent of the other spouse;
- During the marriage each spouse retains control of his or her own property, builds up his or her own estate and each is responsible for his or her own debts.
A carefully drafted marriage contract can save a lot of the time, stress, and costs associated with the dissolution of marriage. Van Heerdens Attorneys can help you determine which matrimonial property regime makes sense for your particular situation and will tailor the document to ensure that it suits the needs of you and your spouse.