Antenuptial Contracts

Getting married will be one of the most significant decisions of your life, and the union between two people is always an exciting and emotional time enjoyed by the couple and their families. 

However, in all the excitement, people easily overlook and forget the legal implications which go hand in hand with this union. It is of utmost importance to take notice of the different matrimonial property systems and their legal implications before the wedding. 

In South Africa, the Matrimonial Property Act presents three possible marital property systems that a couple intending to get married can choose from:

1. Married in Community of Property; or
2. Married out of Community of Property with the exclusion of the Accrual System; or
3. Married out of Community of Property with the inclusion of the Accrual System.

These matrimonial property systems will govern how the couple's assets and debts are handled during their marriage and distributed when the marriage eventually dissolves, either by divorce or death.

Do note that in South Africa, a civil marriage or civil union is, by default, a marriage in community of property. This means that people who get married are automatically married "in community of property" unless:

• The couple agreed to and signed an Antenuptial Contract before their marriage; and
• A Notary Public notarised the Antenuptial Contract before the marriage; and
• Registration of the Antenuptial Contract in the Deed's Office must occur within 3 (three) months following the date of the couple's signature. 

If any one of these requirements have not been met, the couple's marital regime will automatically default to a marriage in a community of property. 

What is "In Community of Property"

When you and your spouse get married without an Antenuptial Contract, your two individual estates will merge into one joint estate. No matter how big or small your estate is, both parties will share equally in the assets of the joint estate once married.

However, although the parties will each be entitled to an undividable 50% share in the assets of the joint estate, each party will become 100% responsible for the total debt of the joint estate. Therefore, if one party was indebted to a creditor and then got married in community of property, the creditor could demand repayment from the debtor and spouse and go further and attach the assets of the joint estate to enforce repayment thereof.

The fact that each party will become 100% liable for each other's debt, in addition to their debt, is why we always recommend that a couple intending to get married conclude an Antenuptial Contract. With an Antenuptial Contract in place, a creditor will only be in a position to demand repayment from the party that incurred the debt. Therefore, the debtor's spouse and assets are protected from such claims.

What is an Antenuptial Contract?

An Antenuptial Contract, also known as a Prenuptial Contract or Prenup, is a contract entered into by two people before their marriage to stipulate the terms and conditions for the exclusion of community of property between them. The terms and conditions may not be illegal, immoral, or contrary to public policy. 

Each spouse usually retains their separate property and has complete freedom to deal with that property as they choose. If one spouse were to be declared insolvent, the other's property would be protected from the insolvent spouse's creditors, subject to Section 21 of the Insolvency Act.

The two options regarding Antenuptial Contracts

An Antenuptial Contract excludes community of property. This can only be achieved by entering into an Antenuptial Contract before you get married. There are two options:

• -out of community of property with the accrual system
• -out of community of property without the accrual system

If you conclude an Antenuptial Contract before your marriage, the accrual system will automatically apply under the Matrimonial Property Act of 1984 unless it is expressly excluded in the contract. 

'Accrual' means increase. An accrual system is a form of sharing the assets that were built up during the marriage. It is the underlying philosophy of the accrual system, that each party is entitled to take out the asset value they brought into the marriage and then share what they have built up during the marriage.

Under both options (with or without the accrual system), the property of one spouse cannot be sold to pay the creditors of the other spouse, even if that spouse becomes insolvent.

Out of Community of Property without the Accrual System

If you don't want the accrual system to apply, it must be expressly excluded in the Antenuptial Contract. This achieves complete separation of spouses' assets - not only those brought into the marriage but also those acquired during the marriage.

Each spouse will retain exclusive ownership of their completely separate estates. Therefore, neither spouse will have any claim against the assets of the other on the dissolution of the marriage. Similarly, neither spouse is or will be liable for the debts of the other. In other words, there is no profit or loss sharing, and the Court has no discretion whatsoever to adjust the division based on equity or fairness.

According to this matrimonial property system, the assets that each spouse brought into the marriage, and the subsequent accumulation during the marriage, will remain their own. Suppose either spouse had any debt before the marriage or incurred any debt after marriage. In that case, the relevant creditor can only enforce repayment of the debt from the spouse that incurred it. 

When the marriage ends, either by death or divorce, each spouse will retain all of their assets brought into the marriage and whatever they accumulated during the marriage.

Married out of Community of Property with the Accrual System

In most cases, the accrual system is, perhaps, the fairest marriage system for most couples. However, before the introduction of the accrual system in 1984, prospective spouses choosing to be married out of community of property had no form to allow sharing of what was built up during the marriage. 

The accrual system was introduced to remedy this - it applies to all marriages out of community of property unless the prospective spouses specifically exclude the accrual system in their contract. This is the most flexible option of the three matrimonial property systems. 

In this option, each spouse retains their assets when they enter the marriage. The value of the assets that they accumulate during their marriage is shared. The debts that each spouse incurs before or during the marriage will, however, only be recoverable by the creditors from the spouse who incurred the debt. 

Again, this means that each spouse and their assets are protected against the claims from the other spouse's creditors. In terms of this regime, both spouses have separate estates during the subsistence of the marriage, and do not share each other's profits or losses during the marriage. 

This system has all the advantages of the protection afforded to marriages concluded out of community of property, i.e., that assets of one spouse are secure from the creditors of the other spouse. Still, it incorporates the ethic of sharing, which is the basis of an in community of property marriage. 

In other words, while neither spouse will be liable for the other spouse's debts, the parties will share the value of what they have acquired during the subsistence of the marriage. This sharing only occurs upon the dissolution of the marriage. This regime of marriage allows for very imaginative and flexible estate planning.

The 'accrual' is the extent to which the respective spouses have become richer by the end of the marriage. In other words, the amount by which each of the spouses' wealth has increased over the period of the marriage. The spouse with the smaller accrual has a claim against the one with the greater accrual for half the difference between the two amounts.

How is accrual calculated?

The starting point is that the parties are married 'out of community of property, and thus the assets are not jointly owned, nor are the parties responsible for each other's debts. Each party has a separate estate from their spouse. 

Only on the dissolution of the marriage, either by death or divorce, is the accrual (growth) in each estate calculated. This is done by deducting the net value of each party's estate at the start of the marriage, as declared by the parties in their Antenuptial Contract, from the net worth of the specific estate at the end of the marriage. 

If one estate has grown more than the other during the marriage, the party with the smaller growth has a claim against the party with the greater growth. The claim is limited to 50% of the value of which one party's estate exceeded the growth of the other's estate. 

To simplify and facilitate the calculations above, the parties should declare the net value of their possessions at the beginning of the marriage as accurately as possible in their Antenuptial Contract. 

Alternatively, a marriage partner may, within six months of the marriage, declare their net worth in a written statement, which must be signed by the other partner and attested by a notary (who will usually be the one that attends to their Antenuptial Contract). The Notary will file the statement with the copy of the Antenuptial Contract in an official record, known as the protocol. 

If either partner's debts at the time of the marriage exceed the value of their property, the net value of their estate at the start of the marriage is to be regarded as nil. Also, suppose either partner fails to state the value of their property in the Antenuptial Contract or a separate statement. In that case, their estate's value at the time of the marriage will also be regarded as nil.

Suppose a partner's estate on marriage is regarded as nil. In that case, everything they own at the end of the marriage will be considered to have accrued during the marriage, unless they can prove that the property belonged to them before the marriage. 

Certain property belonging to either spouse may not be taken into account when calculating the accruals:

• Any damages awarded to either spouse for defamation or pain and suffering;
• Any inheritances, legacies, or gifts that either spouse 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 or the receiver's estate, with the result that the giver cannot recover part of what they gave, and the receiver need not return any of it.
• Compensation for an injury received during the marriage.

When calculating the values at the dissolution of the marriage, allowance is made for any difference in the value of money at the commencement and the dissolution of the marriage, usually with reference to the consumer price index (i.e., the inflation rate).

A simplified example of calculating the accrual payable to a spouse:When a couple got married, the wife's estate was worth R100,000, and the husband's estate was worth R400,000. When they filed for divorce 4 years later, the wife's estate was worth R300,000 while the husband's estate was worth R900,000.

The first step would be to calculate the accrual or growth of each estate -

• WIFE's ESTATE: 

  R300,000 Wife's End Value

-R100,000 Wife's Starting Value

 R200,000 Wife's Accrual 

• HUSBAND's ESTATE: 

  R900,000 Husband's End Value

-R400,000 Husband's Starting Value

  R500,000 Husband's Accrual

The second step will be to calculate the wife's claim (who had less growth in value) against the husband (who had the most increase in value). 

• CALCULATE CLAIM: 

  R500,000 Husband's Accrual (bigger)

-R200,000 Wife's Accrual (smaller)

 R300,000 Exceeded Growth in Husband's Estate

The Husband's accrual or growth exceeded that of his Wife's estate by R300,000. Therefore, the wife will be entitled to 50% of R300,000, amounting to a claim of R150,000 against the husband's estate. 

This amount of R150,000 added to the wife's accrual will result in the total growth of R350,000. It's the same amount as the husband's growth after deducting the wife's claim, i.e., their estates would have increased by the same value since the marriage, being R350,000. 

An accrual claim can only be made on the dissolution of the marriage, not during the marriage. If the marriage is dissolved by death, the accrual claim must be paid before the will or intestate succession is given effect. If the estate of the first dying spouse has a greater accrual, the surviving spouse would have a claim against the deceased estate. 

If the surviving spouse's estate has a greater accrual, the deceased spouse's estate would have a claim against the surviving spouse. However, it becomes academic if such surviving spouse is the sole heir/heiress by virtue of the will or intestate succession (i.e., how an estate devolves when a person dies without leaving a will). Therefore, calculating the accrual is unnecessary as the surviving spouse receives everything.

How to register an Antenuptial Contract

Please note that the Antenuptial Contract must conform to specific standards and prescriptions for the Registrar of Deeds to accept and register it. Although anyone with enough knowledge could probably draft an Antenuptial Contract, only an attorney who is a Notary may tend to the registration thereof. 

The Antenuptial Contract must be signed in his presence by you and your future spouse or by someone you both have given Power of Attorney to sign it on your behalf. 

We have simplified the drafting, signing, and registration process to enable us to register anyone's Antenuptial Contract, no matter where in South Africa you reside. To start the process, email info@gmilaw.co.za or phone us at 087 057 1790.

_{Copyright © 2023 Rohan Lamprecht. Disclaimer: The information in this article is of a general nature for educational purposes only, relevant to the publishing date. Any opinions expressed are solely those of the author and do not necessarily reflect the views or opinions of Grobler Malope Inc. The content is not intended to constitute professional or legal advice, and you are encouraged to call and consult with our attorneys to discuss your specific situation before making any decisions. Grobler Malope Inc - 087 057 1790 - info@gmilaw.co.za}