Understanding Antenuptial Agreements and Asset Exclusion in Marriage

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.

  

SCA Judgment on Arbitration Clause in Divorce Settlement: VJ v VJ and Another

Introduction

In June 2024 the Supreme Court of Appeal (SCA) delivered a significant judgment in the case of VJ v VJ and Another (258/2023) [2024] ZASCA 92. The case revolved around whether an arbitration agreement included in a divorce settlement deed could be used to resolve disputes related to arrear maintenance. The SCA ruled that such disputes are not arbitrable and upheld the jurisdiction of the Maintenance Court.

Summary of the Law

The Arbitration Act 42 of 1965 (the Arbitration Act) governs the use of arbitration to resolve disputes in South Africa. Section 2(a) of this Act specifies that arbitration cannot be used for “any matrimonial cause or any matter incidental to any such cause.” This provision aims to ensure that certain personal and family matters, which require special legal handling, are not subject to arbitration but are adjudicated by courts that are specifically empowered to address them.

Case Background

In this case, the appellant and the first respondent were divorced in 2015, with a deed of settlement incorporated into the divorce decree. This deed included an arbitration clause for resolving disputes between the parties. In 2018, the appellant sought to enforce a maintenance order and recover arrear maintenance payments from the first respondent.

The appellant approached the Maintenance Court under Section 26 of the Maintenance Act 99 of 1998 to obtain a court order for these arrears. On March 1, 2021, the Maintenance Court granted the order and barred Capitec Bank from releasing funds from the first respondent’s account.

Displeased with this order, the first respondent argued that the dispute should be settled through arbitration according to the settlement deed’s arbitration clause. The Maintenance Court dismissed this objection, maintaining its jurisdiction to handle the case. The first respondent appealed this decision to the High Court, which ruled in favour of arbitration. The appellant then sought special leave to appeal to the SCA.

Findings of the Court

The SCA was tasked with interpreting Section 2(a) of the Arbitration Act to determine whether arrear maintenance issues could be resolved through arbitration. The Court concluded that the phrase “matrimonial cause or any matter incidental to any such cause” in Section 2(a) is broad enough to exclude arrear maintenance from arbitration.

The Court emphasized that maintenance disputes are closely tied to matrimonial causes and thus fall within the scope of issues that the Arbitration Act excludes from arbitration. The purpose of the Maintenance Act is to provide a streamlined, cost-effective process for resolving maintenance disputes, which the SCA noted could not be adequately achieved through arbitration.

Furthermore, the SCA highlighted that Maintenance Courts have specific powers to enforce, vary, or suspend maintenance orders—functions that arbitrators do not possess. This distinction underlined the necessity of keeping maintenance matters within the jurisdiction of the Maintenance Court.

The Court also addressed the issue of res judicata, which was raised by the first respondent, asserting that the argument did not apply in this context due to the provisions of Section 8(1) of the Divorce Act.

Conclusion

The SCA's judgment in VJ v VJ and Another affirms that disputes over arrear maintenance and the enforcement of maintenance orders are not arbitrable under South African law. The Court's ruling underscores the importance of maintaining the Maintenance Court's exclusive jurisdiction over such matters, aligning with the intent of the Maintenance Act to ensure accessible and efficient resolution of maintenance issues. Consequently, the SCA set aside the High Court’s decision and upheld the Maintenance Court’s original ruling, reinforcing the proper application of the Arbitration Act in family law contexts.