What your antenuptial contract means for your financial planning

A significant benefit of having an ante-nuptial 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 is an ante-nuptial contract?

An ante-nuptial 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 ante-nuptial 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 it be signed?

A couple planning to get married should sign their antenuptial contract before getting married. Failure to sign an ante-nuptial 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.

How much does it cost?

The cost of an ante-nuptial contract can range from about R1 500 upwards, depending on the law firm that you use. Some law firms now offer online functionality which allows you to prepare your antenuptial contract online, whereafter 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 ante-nuptial 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.

When and where must it be registered?

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 is the accrual?

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 ante-nuptial contract.

What is included in an ante-nuptial contract?

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 ante-nuptial contract would also include detail of how the accrual will be calculated on death or divorce.

How does it affect ownership of immoveable property?

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 ante-nuptial contract should be recorded for future accrual calculation purposes.

What happens when one spouse dies?

Your accrual contract continues to apply after 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 whereafter, 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 still have 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 an ante-nuptial 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 on the accrual. This is because, while all debt incurred before the date of marriage is excluded from the ante-nuptial 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 dealt with?

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 ante-nuptial 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 to in terms of the fund rules if their membership had terminated due to resignation at the date of dissolution of the marriage. In the case of a retirement annuity, the pension interest refers to the total amount of the member’s contribution to the fund up to the date of dissolution plus simple interest at the prescribed rate.

What happens if you get divorced?

If you and your spouse get divorced, the accrual system will be used to determine the net increase in the value of each estate since the start of the marriage. This means that whatever belonged to each of you before the marriage, remains yours respectively; but whatever you have built together during your marriage will be shared equally. At the time of your divorce, only those assets and liabilities that were acquired during the marriage will be taken into account when calculating the accrual. The first step would therefore be to add calculate the assets of each spouse that accrued during the marriage, less any assets that should specifically be excluded, such as inheritances or donations, less any liabilities that accrued during the course of the marriage. From this total, each spouse will need to deduct the commencement value of their respective estates, adjusted for CPI, to arrive at the accrual in their estate. The value of the smaller estate will then be deducted from the value of the larger estate, with each spouse having a 50% claim to the difference.

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