A significant benefit of having an antenuptial contract in place is that it allows you and your soon-to-be spouse to self-determine the financial consequences of your pending marriage. It’s a hugely important document in the life of a married couple and deserves careful attention. Here’s what to know:
What exactly is an antenuptial contract?
An antenuptial contract is an agreement between two marrying partners that sets out the financial consequences of the upcoming marriage, and, as such, it is a critically important document to get right. If you and your partner do not sign an antenuptial contract, the automatic financial consequence will be an in-community of property marriage with a single, joint estate. As such, as a couple planning to marry, you can customise your antenuptial contract to tailor-make your marriage contract and the financial consequences that flow from it.
When should you sign your antenuptial contract?
A couple planning to get married should sign their antenuptial contract before getting married. Failure to sign an antenuptial contract prior to the date of marriage will mean that you and your partner will automatically be married in community of property. While legislation provides mechanisms for married couples to change their matrimonial property regime, this can be costly, and it is therefore advisable to get the contract right from the get-go. Once you and your fiancé are happy with the contract, you will each sign the agreement in duplicate together with your attorney, who will then be responsible for its registration with the Deeds Office.
What are the costs involved?
The cost of an antenuptial contract can range between R3 000 and R5 000, depending on the law firm that you use. Some law firms now offer online functionality which allows you to prepare your antenuptial contract online, after which it will be checked by an attorney. Once you are happy with the contract, you and your partner can sign the contract and courier the original to the attorney firm, who will then register it on your behalf. While this manner of having an antenuptial contract prepared may appear simpler, our advice is to seek in-person advice from an attorney (who must also be a Notary Public) to ensure that you clearly understand the financial implications of your contract.
Registration: Timing and location
After your legal marriage, your attorney will be responsible for registering your antenuptial contract at the Deeds Office in the area where you reside. Remember, your attorney must register your antenuptial contract within three months of the date of signature, so it is important to get your timing right in relation to your date of marriage.
What exactly is the accrual system?
The accrual system is a form of out-of-community-of-property marriage where each spouse keeps a separate estate for the duration of the marriage, but when the marriage is dissolved (through either death or divorce), the spouses share equally in the growth of the two estates during the marriage’s subsistence. If you do not want the accrual system to apply to your marriage contract, you will need to expressly exclude it in your antenuptial contract.
What should your antenuptial contract include?
Assuming that you intend to include the accrual system in your marriage contract, your antenuptial contract would need to expressly exclude community of property and community of profit and loss from your marital contract. Most such contracts would then specifically incorporate the accrual system and stipulate that each spouse’s right to the accrual cannot be transferred. Each party to the contract should declare what is referred to as the commencement value of their respective estates for future accrual calculation purposes. Inheritances, legacies, and donations which may accrue to either party during the course of the marriage would be specifically excluded from the accrual, together with any damages for patrimonial loss that may accrue to either party during the marriage. Your antenuptial contract would also include details of how the accrual will be calculated on death or divorce.
Property ownership under the accrual system
The essence of an accrual marriage is that each spouse retains a separate estate for the duration of the marriage and that, in the event of dissolution, the accrual calculation is employed. As such, it makes no difference whether the couple owns fixed property jointly or in their own names, as the extent to which the value of the property increased during the course of the marriage will be used to determine the accrual on death or divorce. That said, if a partner owns fixed property going into the marriage, the value of that property at the time of signing the antenuptial contract should be recorded for future accrual calculation purposes.
What happens to the accrual if one spouse dies?
Your accrual contract continues to apply until the death of the first-dying spouse, at which point the accrual will come into account. The executor of the first-dying spouse’s deceased estate will need to calculate the increase in the real value of the two estates, after which, simplistically speaking, the two estates will be added together and divided by two. Where the deceased’s estate is larger than that of the surviving spouse, the surviving spouse will have a claim against that estate for her share of the accrual. Conversely, if the surviving spouse’s estate is larger, the deceased’s estate will have a claim against the surviving spouse’s estate for his share of the accrual.
Do you retain freedom of testation?
Yes, although it is vital to ensure that you understand how your antenuptial contract affects your overall estate plan. Keep in mind that each spouse’s right to their share of the accrual in the event of the first-dying spouse comes before any effect is given to any testamentary disposition or bequest.
How does the contract deal with debt?
A significant advantage of out-of-community-of-property marriages is that each spouse remains responsible for their own debt. That’s not to say, however, that the reckless financial behaviour of one spouse cannot impact the accrual. This is because, while all debt incurred before the date of marriage is excluded from the antenuptial contract, all debt incurred by each spouse during the marriage is included in the accrual calculation on the dissolution of the marriage.
How are retirement funds treated?
Where one or both spouses contribute towards a retirement fund, the value of the retirement fund will be included in the accrual calculation, unless it was expressly excluded in terms of your antenuptial contract. In respect of pension, provident, and preservation funds, the pension interest is the total benefit to which the member spouse would have been entitled if their membership had terminated due to resignation at the date of dissolution of the marriage.
While marriage is a deeply personal commitment, your antenuptial contract significantly influences your financial security and estate planning. Our advice is to seek professional guidance to ensure your antenuptial contract accurately reflects your intentions and provides clarity and protection for both you and your spouse, now and in the future.
Have a fantastic day.
Sue
