Marriages Under the Accrual
System
The Matrimonial Property Act 88
of 1984 (the Act) provides that when a couple signs an antenuptial contract
that excludes community of property and community of profit and loss, their
marriage automatically follows the accrual system —unless they specifically
agree to exclude it.
Under the accrual system, when
the marriage ends (either through divorce or the death of a spouse), the spouse
whose estate grew less during the marriage (or their estate if they have passed
away) has a right to claim half of the difference in growth between the two
estates.
The "accrual" of an
estate is simply the increase in its net value from the start of the marriage
to the time it ends.
The Act states that when
calculating the starting value of a spouse’s estate at the time of marriage,
adjustments must be made to account for inflation. This means that any changes
in the value of money between the start and end of the marriage (whether due to
divorce or death) are considered. To measure this change, the Consumer Price
Index (CPI) — as published in the Government Gazette — is used as proof of how
money’s value has shifted. This ensures that the original estate value is
fairly adjusted to reflect its real worth at the time of dissolution.
While the CPI is commonly used in
practice to adjust commencement values for inflation, parties can contract out
of using CPI by specifying alternative methods in their antenuptial contract.
Use of
CPI in Practice
The Consumer Price Index (CPI) is
used to account for inflation when calculating how much a spouse's estate was
worth at the time of marriage. To do this, the CPI at the time of divorce (or
death) is divided by the CPI at the time of marriage. The result is used to
adjust the starting estate value so it reflects what it would be worth in
today's money. This ensures that each spouse's starting wealth is fairly
measured in a way that considers changes in the cost of living over time.
Here’s a breakdown:
- Net Commencement Value: This is the net
value of each spouse’s estate at the beginning of the marriage, as
declared in the antenuptial contract. It includes all assets minus
liabilities.
- Weighted Consumer Price Index (CPI): The CPI
is a measure of inflation. To adjust the commencement value, you use the
CPI to reflect how much the value of money has changed since the marriage
began.
- Adjustment Process:
- Identify the CPI at the time of marriage and at
the time of divorce or death.
- Calculate the adjustment factor by dividing the
current CPI by the CPI at the time of marriage.
- Multiply the commencement value by this adjustment
factor to get the adjusted commencement value.
Example:
- CPI
at Marriage (2000): 45.975
- CPI
at Divorce (2010): 109.26
- Commencement
Value: R100,000
Adjustment Factor: 109.26 / 45.975 = 2.37
Adjusted Commencement Value: R100,000 × 2.37 = R237,520
This adjusted value is then used
to calculate the accrual, which is the increase in the value of
each spouse’s estate during the marriage. The accrual is shared equally between
the spouses upon divorce or death.
This process ensures that the
initial values are adjusted for inflation, providing a fairer basis for
calculating the accrual and dividing assets.
Contracting
Out of Using CPI
Parties can include provisions in
their antenuptial contract to use alternative methods for adjusting
commencement values instead of the Consumer Price Index, such as market value,
to account for inflation or other factors affecting asset values. This flexibility
allows couples to structure their marital property regime to suit their
specific needs and financial circumstances.
The couple (or their executors)
can agree in writing on how to value their assets at the time of divorce or
death. If they cannot agree, a sworn appraiser or valuer will assess the
estates following estate valuation practices. If they cannot decide on an
appraiser, they can agree that the Chairman of the Arbitration Foundation of
Southern Africa will appoint one, and their valuation will be final unless
there is a clear mistake.