Antenuptial contracts: With or without the accrual system?

The default matrimonial property law regime in South Africa is a marriage in community of property.  This happens by law if parties sign a marriage register (which is usually signed on the day of the wedding) without having signed an Antenuptial Contract before signing the marriage register.  The parties to such a marriage share one estate, i.e. all debts and assets are jointly owned by both parties.If parties decide to marry out of community of property, they have to enter into an Antenuptial Contract to separate their respective estates.

What is an antenuptial contract?

An Antenuptial Contract is an agreement in terms of which the parties determine that they want their marriage to be out of community of property.  When preparing the Antenuptial Contract, one of the important decisions is whether the accrual system (explained below) will be applicable to their matrimonial property regime or not.  An antenuptial contract is prepared by a Notary Public and signed by both parties and two witnesses in the presence of the Notary Public.  The signed Antenuptial Contract has to be registered in the Deeds Registries Office within 3 months after date of signature.  The date of signing the marriage register and/or the wedding date is not relevant in this context.

What is the accrual system?

The accrual system is a regime that implements a formula whereby the party whose estate shows no accrual during the marriage, or a smaller accrual than the estate of the other, or in the case of the death of the first mentioned party, his or her executor, will have a claim against the other party or his or her estate for an amount equal to one half of the difference between the accruals of the respective estates of the parties.  For purposes of determining the accrual of each party, they will be expected to declare their asset values at the commencement of the marriage, which will be deducted from their asset value at the termination of the marriage, to determine the accrual.

The accrual claim only vests at the dissolution of the marriage and shall not during the subsistence of the marriage be transferable or liable to attachment or form part of the insolvent estate of either party.

Whether or not to include the accrual system in an Antenuptial Contract is a personal choice of the prospective spouses.

It is important that both parties consult with the Notary Public preparing the Antenuptial Contract so that they are both fully appraised of the consequences of the different regimes.

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)

How can a person get married in South Africa?

A person can get married by way of a civil marriage, customary marriage, civil union or religious marriage. A religious marriage is not recognised as a valid marriage, unless a marriage officer officiates, but the spouses in a religious marriage can be protected by law in certain instances.

What are the general requirements for a valid marriage?

  1. Both persons to the marriage must give consent to get married and must be older than 18 years of age.
  2. A person younger than 18 years of age, needs the permission of his/her parent/s or guardian/s to get married.  No person younger than 18 years of age can enter into a civil union.
  3. The marriage must be lawful in terms of rules such as the following:
    1. Persons who are closely related (such as brother or sister, or parent and child) may not get married.
    2. A person may not be party to more than one marriage at a time, except for customary marriages.
  4. Certain formalities must be adhered to, such as that the marriage must be concluded by a marriage officer in the presence of two witnesses.
  5. A marriage must be registered at the Department of Home Affairs.

The difference between marriage in and out of community of property:

  1. MARRIAGE IN COMMUNITY OF PROPERTY:  There is one estate between a husband and a wife.  Property and debts acquired prior to or during the marriage are shared equally in undivided shares (50%).  Both spouses are jointly liable to creditors, with certain exceptions.
  2. MARRIAGE OUT OF COMMUNITY OF PROPERTY WITHOUT THE ACCRUAL SYSTEM:  The spouses have their own estates which contain property and debts acquired prior to and during the marriage (“what is mine is mine and what is yours is yours”).  Each spouse is separately liable to his/her creditors.  Prior to the marriage, an antenuptial contract must be entered into to indicate that the marriage will be out of community of property.
  3. MARRIAGE OUT OF COMMUNITY OF PROPERTY WITH THE ACCRUAL SYSTEM:  This is identical to a “marriage out of community of property”, but the accrual system will be applicable.  The accrual system involves the calculation of how much the larger estate must pay the smaller estate once the marriage comes to an end through death or divorce.  Only property acquired during the marriage can be considered when calculating the accrual.  The accrual system does not automatically apply and must be included in an antenuptial contract.

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)

References:
https://www.legalwise.co.za/help-yourself/quicklaw-guides/marriages/

Dealing with marriage and estate planning

It is important to understand the legal implications of the marital property regime, especially when drafting a Last Will and Testament and also when entering into a marriage, as the regime chosen by the estate planner is going to affect his/her assets.The most important forms of marriage are: marriage in community of property, marriage out of community of property (without accrual), and marriage out of community of property (with accrual).

Marriage in community of property

1. There is no prior contractual arrangement, apart from getting married;
2. Spouses do not have two distinct estates;
3. There is a joint estate, with each spouse having a 50% share in each and every asset in the estate (no matter in whose name it is registered);
4. Applies to assets acquired before the marriage and during the marriage;
5. Should one spouse incur debts in his own name it will automatically bind his/her spouse, who will also become liable for the debt;
6. If a sequestration takes place (in the case of insolvency), the joint estate is sequestrated.

Marriage out of community of property without the accrual system

1. An antenuptial contract (ANC) is drawn up by an attorney (who is registered as a notary), before the marriage;
2. Where there is no contract, the marriage is automatically in community of property;
3. The values of each spouse’s estate on going into the marriage are stipulated in the contract;
4. A marriage by ANC means that all property owned by spouses before the date of the marriage will remain the sole property of each spouse;
5. Each spouse controls his/her own estate exclusively without interference from the other spouse, although each has a duty to contribute to the household expenses according to his/her means;
6. To allow for assets acquired by spouses during the marriage to remain the sole property of each spouse, the accrual system must be specifically excluded in the ANC.

Marriage out of community of property with the accrual system

1. The accrual system automatically applies unless expressly excluded in the antenuptial contract;
2. The accrual system addresses the question of the growth of each spouse’s estate after the date of marriage.

Estate planning

Donations between spouses are exempt from donations tax and estate duty.

Marriage in community of property

1. In the event of the death of one spouse, the surviving spouse will have a claim for 50% of the value of the combined estate, thus reducing the actual value of the estate by 50%. The estate is divided after all the debts have been settled in a deceased estate (not including burial costs and estate duty, as these are the sole obligations of the deceased and not the joint estate).
2. When drafting a Last Will and Testament, spouses married in community of property need to be aware that it is only half of any asset that he or she is able to bequeath.
3. Upon the death of one spouse, all banking accounts are frozen (even if they are in the name of one of the spouses), which could affect liquidity.
4. Donations or bequests to someone married in community of property can be made to exclude the community of property; in other words, if the donor stipulates that the donation must not fall into the joint estate, then the donee can build up a separate estate. However, returns on such separate assets will go back to the joint estate.

Marriage out of community of property without the accrual system

Each estate planner (spouse) retains possession of assets owned prior to the marriage.

Marriage out of community of property with the accrual system

A donation from one spouse to the other spouse is excluded from the calculation of each spouse’s accrual; in other words, the recipient does not include it in his growth and the donor’s accrual is automatically reduced by the donation amount.

Divorce

In the event of divorce, the marriage will be dissolved by court decree, which will address such aspects as child maintenance, access, guardianship and custody, spousal maintenance, the division of assets, division of pension interests and so on.

Cohabitation and definition of “spouse”

Cohabitation is defined as a stable, monogamous relationship where a couple who do not wish to or cannot get married, live together as spouses. The Taxation Laws Amendment Act has extended the definition of “spouses” to include “a same sex or heterosexual union which the Commissioner is satisfied is intended to be permanent”.

Many pieces of legislation, including the Pension Funds Amendment Act and the Taxation Laws Amendment Act, now define spouse to include a partner in a cohabitative relationship, the effects of which are that cohabitees will benefit from the Section 4(q) estate duty deduction in the Estate Duty Act, and the donations tax exemptions of the Income Tax Act.

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)