Introduction
When
two individuals decide to get married, one of the key financial decisions they
face is whether to enter into a marriage with an antenuptial agreement (ANC).
An ANC, also known as a marriage contract or prenup, allows couples to manage
their assets and liabilities separately, rather than marrying in community of
property. This legal contract is especially relevant for those entering a
second marriage or owning a business prior to marriage. The ANC helps in
determining how assets brought into the marriage, as well as those acquired
during the marriage, are treated, providing clarity and protection for both
partners.
Summary of the Law
In
South Africa, marriage can occur with or without an antenuptial agreement.
Without an ANC, the marriage automatically defaults to "in community of
property," meaning all assets and debts are shared equally between
spouses. However, if couples wish to manage their assets separately, they must
enter into an ANC before marriage. This agreement allows them to avoid sharing
assets and debts unless they specifically agree to do so. There are two main
options for an ANC: one with the accrual system and one without it.
ANC
Without the Accrual System
When
an ANC is signed without the accrual system, each spouse retains ownership of
their separate estates throughout the marriage. This means that any assets or
liabilities they had before the marriage, as well as anything they acquire
afterward, remain theirs alone. There is no sharing of assets upon divorce or
death, making this arrangement ideal for individuals who want to fully protect
their personal property or business interests from their spouse. This option is
often preferred by couples where one or both partners have significant
pre-existing assets.
ANC
With the Accrual System
In
contrast, an ANC with the accrual system offers more flexibility. Under this
system, the parties can decide whether the assets each spouse brings into the
marriage will remain their separate property or be included in the shared
estate. If they choose to exclude these pre-marital assets, they will not be
subject to division upon divorce or death. The growth or increase in the value
of the spouses' estates during the marriage, including assets acquired after
the marriage, is shared. This means that while pre-marital assets can be
protected, the accrual system ensures both parties benefit from the wealth they
build together during the marriage.
Accrual
only takes effect when the marriage ends, whether by divorce or death. The
spouse with the smaller accrual (growth in their estate) is entitled to half of
the difference in growth between the two estates. This ensures that both
spouses share in the joint efforts of the marriage but protects assets brought
into the marriage. For example, if one spouse’s estate grew by R1 million
during the marriage and the other spouse’s estate grew by R500,000, the spouse
with the smaller growth would have a claim to half of the R500,000 difference,
equating to R250,000. However, the percentage share can be customized in the
ANC based on the couple’s preferences.
The Process of Drafting an ANC
When
preparing an ANC, couples need to work with a notary to draft the contract
before the marriage takes place. One key step in the process is compiling a
detailed list of assets each spouse owns at the time of marriage, along with
the market value of each item. This is important because these values will serve
as the basis for calculating the accrual in the event of divorce or death.
Couples also have the option to exclude certain assets from the accrual
calculation. Inheritances or gifts received during the marriage are
automatically excluded from accrual, but other exclusions must be specifically
listed in the contract.
Once
the ANC is drafted, it must be signed in the presence of two witnesses and then
registered with the appropriate authorities. The contract should be carefully
worded and reviewed by both parties to avoid future disputes, particularly
regarding the valuation of assets.
Conclusion
Choosing
an antenuptial agreement is a critical decision for couples about to marry, as
it offers flexibility in how their assets and liabilities are managed during
and after the marriage. Whether they opt for an ANC with or without accrual,
the agreement can protect individual assets, safeguard business interests, and
provide clarity in the event of divorce or death. Couples should carefully
consider their financial circumstances and consult a legal professional to
ensure their ANC reflects their wishes and provides the necessary protection
for both parties.
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