What is an Antenuptial Contract?
An Antenuptial Contract, also known as a Prenuptial Contract or Prenup, is a contract entered into by two people prior to 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 his or her separate property and have complete freedom to deal with that property as he or she chooses.
If one spouse was declared insolvent, the other’s property is protected from the insolvent spouse’s creditors, subject to Section 21 of the Insolvency Act.
Why is an Antenuptial Contract important?
Getting married is a huge milestone in many peoples’ lives. It’s a moment characterised by love, joy and fulfillment. There are various laws that govern the way two people are joined in marriage. It’s vital that both partners are legally protected.
In South Africa, if a couple is married without an antenuptial contract, they are automatically married in community of property. This form of marriage means that couples have a joint estate, whereby everything is shared. Couples have joint responsibility for debts and liabilities incurred. It can become problematic when one of the partners faces insolvency or financial trouble. In the case of a divorce, there is no guarantee of who will receive what.
For this reason, it may be beneficial for a couple to get an antenuptial contract before getting married.
An antenuptial contract serves to clarify the property ownership rights of each individual prior to being legally married.
MARRIAGE IN COMMUNITY OF PROPERTY
If you do not sign an antenuptial contract before marriage, you are automatically married in community of property in terms of South African law.
In community of property’ means that everything a spouse owns, as well as his/her debts gets’ combined from before the time of their marriage and put together in a joint estate. From this point onward, everything either partner earns or buys will form part of this joint estate, including any debts incurred by either one of them. Everything they earn after their marriage will also form part of this joint estate, including any debt and liabilities incurred by either one of them.
If one spouse is reckless with their financial affairs, it will affect the other spouse, as they are each responsible for one another’s debts.
MARRIAGE OUT OF COMMUNITY OF PROPERTY WITHOUT THE ACCRUAL SYSTEM
This type of marriage becomes effective when the parties enter into an antenuptial contract. This is a contract entered into by both parties and sets out the rules and conditions in respect of the division of assets, and which will apply during the marriage. In the case of marriages out of community of property without accrual, the property owned by a person prior to the marriage, as well as all property accumulated during the marriage, belongs only to that person. The same rule applies to liabilities. Each party’s debt remains his or her responsibility. Consequently each party may deal arbitrarily with his or her estate in a will.
MARRIAGE OUT OF COMMUNITY OF PROPERTY WITH INCLUSION OF THE ACCRUAL SYSTEM
With a marriage out of community of property with the accrual system each spouse still has his/her own estate with assets and liabilities. Neither can be held liable for the debts of the other.
As soon as the marriage is however dissolved through death or divorce a redistribution of assets is done according to the following formula:
The spouse who’s accrual of his/her estate during the marriage is smaller, is entitled to half of the difference between the accruals of the two estates.
Accrual = the beginning value of estate less the end value thereof.
The beginning values is stipulated in the marriage contract, whilst the end value has to be calculated as soon as the marriage is dissolved.
Should no beginning value be mentioned in the marriage contract, it is regarded as nil.
Where the marriage is dissolved through death, the will of the deceased spouse (or the law of intestate succession in the absence of a will) will determine what happens to the balance of the assets of the deceased after the accrual claim has been considered.
How is the accrual calculated?
During a marriage which is entered into out of community of property with the accrual system 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. On dissolution of the marriage (either by death or divorce), the value of the assets obtained during the marriage (the accrual) will be shared equally. The accrual is determined by calculating the difference in the net starting value and the net final value of the estate of each spouse with the exclusion of inheritances, legacies and donations. On dissolution of the marriage the value of the difference in the accrual of the two estates, taking inflation into account, is then divided equally. Let's look at a practical example of an accrual calculation. Let say a couple got married in early 2000 with an ante nuptial contract which included the accrual system. This is how things stood at the beginning of the marriage: 1. Husband owned a home worth R350,000 at the time and also a car worth R120,000. 2. Wife owned furniture worth R60,000 and a car worth R85,000. 3. Their combined assets stood at R615 000, with the husband responsible for R470 000 thereof and the wife the remaining R145 000. 4. Neither had any liabilities. An accrual calculation should the marriage dissolve in 2010: The husband's home is now worth R1,500,000 and his latest car is valued at R350,000. The wife in the meantime had built up a collection of furniture worth R450, 000 and also owned a new car worth R240,000. Her dad had also left her a holiday home which was currently worth R750, 000 Together their assets equaled R3, 290, 000 with the husband's share of that being R1, 850, 000 and the wife's share R1, 440, 000. Neither of them had any liabilities. In 2010: Husband's assets: R1,850,000 Wife's assets: R1,440,000 Couple's total assets: R3,290,000 This is how the accrual claim is calculated: First: The couple needs to find out what the weighted consumer price index (CPI) rate was at 2000 when they got married and also now in 2010 when they divorce. February 2000 : 60,40 June 2010 : 111,50 Second: They need to adjust their asset values at the beginning of the marriage in order to take into account inflation. Husband: R470, 000 x 111,50 ÷ 60, 40 = R867, 632 Wife: R145, 000 x 111,50 ÷ 60, 40 = R267, 674 Now both husband and wife know how much their original assets are worth in today's money. Thirdly: They now calculated their accrual claim.
Husband Wife Net value of assets/estate R1,850,000 R1,440,000 Less: Inheritance R 750,000 Equals: Subtotal R1,850,000 R 690,000 Less:
Value at beginning of marriage R 867,632 R 267,674 Equals: Net value of assets R 982,368 R 422,326
Straight away they can both see that the wife, with the smaller estate, has an accrual claim against the husband. Fourth… They now need to determine the difference between each other's respective assets and award half of that to the wife since hers is the smaller of the two. R982,368 – R422,326 = R560,042 as the difference R560,042 ÷ 2 = R280,021 The wife has a claim against the husband's assets for an amount of R280,021 when they get divorced.
CONCLUSION
In order for a marriage to be out of community of property (whether with or without accrual), an ANC must be signed before the marriage is concluded, in the presence of a notary public and two competent witnesses. The notary must then register the ANC in the local registry of deeds within 3 (three) months of the date of signature of the ANC.
It is of utmost importance that parties wishing to conclude an ANC fully understand what it is they are signing. It is for this reason that a standard form contract cannot be used and that the services of a knowledgeable and reputable notary public should be utilised.
For professional but personal advice on, and assistance with, concluding an ANC, please contact Leoni Naude INC @ admin@lninc.co.za or contact 010 140 5775 or click on this link and submit your details, and we will get back to you. https://www.leoninaudeinc.com/contact
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
