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An Antenuptial/Pre-marriage Contract is also known as a Prenup, Prenuptial Contract or marriage contract. The word ante means before and nuptial means marriage in Latin, thus an Antenuptial Contract is a Pre-Marriage Contract.

A Pre-Marriage Contract is a contract entered into by people who want to enter into a marriage or civil union. The contract must be signed by prospective spouses or their duly authorized agent before a Notary Public and two competent witnesses and must be registered at the deeds office within 3 (three) months of signature. The contract stipulates terms and conditions excluding community of property between them. The prospective spouses thus dictate the terms and conditions that will govern and regulate their marriage.

It is vital for prospective spouses to think through the final decision on whether the marriage should be in a community of property, or out of the community of property with or without accrual. A wrong decision can cause adversity.

MARRIAGE SYSTEMS IN SOUTH AFRICA

i) Marriage in Community of Property

This is a default position where parties decide not to conclude a Pre-Marriage Contract. This entails that the parties will have a joint estate where all assets and liabilities of spouses, whether acquired before or during the marriage, fall within one joint estate.

Disadvantages of being married in community of property:

  • If one of the spouses is indebted, their creditors have a claim to all the assets in the joint estate.
  • The insolvency of one spouse affects both parties in that all assets in the joint estate would be subjected to attachment by debt collectors.
  • There is no financial independence, certain transactions, such the sale of shares, immovable property, need the consent of both parties.
  • If one spouse dies, the estate of both the deceased and surviving partner will be wound up because it is a joint estate which is not great for the surviving partner.

Advantages of a marriage in community of property:

  • On death or divorce, the estate is divided equally.

ii) Marriage out of Community of Property without Accrual – out & out

  • This is when the prospective spouses conclude a Pre-Marriage Contract before the conclusion of their marriage. This entails that each party has, and maintains, a completely separate estate in other words there will be no joint estate.
  • Each party’s assets are protected against claims of the other party’s creditors, in other words, each party is liable for his or her own debt. There is no provision for sharing and/or redistribution of assets.

Pros of being married out of community of property without the accrual system:

  • Freedom to contract.
  • One insolvent spouse does not drag the other into their insolvency, creditors may not attach the assets of the solvent spouse.

Disadvantages of being married out of community of property without the accrual system:

  • At the dissolution of the marriage either by death or divorce, each party will be entitled to what they brought and accumulated in the marriage.

iii) Marriage out of Community of Property with inclusion of the Accrual System

  • Each spouse is the owner of their own estate which means that they may own property independently and are liable for their own debt.
  • Inheritances, legacies and donations, including assets acquired by virtue of them are excluded from accrual, unless the spouses specifically include the assets in their Pre-marriage contract or if the testatrix or donor stipulate otherwise.
  • In the Pre-Marriage Contract the parties may exclude certain assets that are properly described from forming part of the accrual.

Pros of being married out of community of property with the accrual system:

  • Both parties share in the wealth accumulated during marriage.
  • Parties retain ownership of all their assets.
  • Parties can deal independently with their financial affairs.
  • Parties manage their estate independently and the debts of the other spouse may not be claimed against the spouse who did not incur them.
  • It protects the partner who remains at home to care for the family.
  • In the event of divorce or death, any assets acquired whilst married are shared – it doesn’t matter who acquired them; each partner’s current net asset value is calculated by subtracting all liabilities from assets.

Calculating the accrual at dissolution of marriage:

Each party’s estate is calculated by realising all assets, determining all liabilities, subtracting liabilities from assets and arriving at a nett asset value. In calculation we have to take into account the Consumer Price Index (CPI). The value of the smaller estate is subtracted from the 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.

Below is an example of a CPI calculation followed by a calculation of the accrual. In this case the husband and wife were married in 2001 and divorced in 2019. The Husbands commencement value is in ANC was R100 000.00 and the wife’s’ was R50 000.00. Using the CPI formula, the amounts are adjusted as to their respective value in 2019 and this amount is subjected from the assets in the accrual calculation.

Asset value at date of marriage x CPI dissolution/CPI commencement

HusbandWife
Commencement value at date of marriageR 100,000R 50,000Table B1
CPI Dissolution112.2112.22019Average
CPI Commencement42422001Average
CPI AdjustmentsR 267,142.86R 133,571.43

Below is an example of a simple accrual calculation. In this case the wife’s accrual claim against her husband is R 2 198 214.29

ACCRUAL CALCULATION
HUSBANDWIFE
ASSETS
Immovable PropertyR 3,500,000R 0
PensionR 1,500,000R 500,000
Motor VehicleR 300,000R 200,000
ASSETS TOTALR 5,300,000R 700,000
LIABILITIES
Motor VehicleR 50,000R 30,000
Credit CardR 60,000R 10,000
LIABILITIES TOTALR 110,000R 40,000
SUB TOTALR 5,190,000R 660,000
LESS EXCLUDED ASSETSR 0R 0
SUB TOTALR 5,190,000R 660,000
LESS CPI ADJUSTMENTR 267,142.86R 133,571.43
ACCRUAL VALUER 4, 922,857.14R 526,428.57
DIFFERENCE BETWEEN THE TWOR 4,396,428.57
50% OF DIFFERENCE BETWEEN THE TWOR 2,198,214.29

The content of this article is intended to provide general guidance on the registration of pre-marriage contracts. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Contact us for registration of bespoke pre-marriage contracts at info@rnkinc.co.za / sadar@rnkinc.co.za / ndivhon@rnkinc.co.za

By Sada Sy Jesse Raulinga | Attorney | Notary Public

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