ANTENUPTIAL CONTRACTS

ANTENUPTIAL CONTRACTS

ANTENUPTIAL CONTRACTS

In the absence of an Antenuptial Contract, the parties are married in Community of Property which means that their estates are joined, and they share assets and liabilities. 

Unfortunately, all debts incurred by one partner are debts of the joint estate which means that you may find yourself liable for your partner’s debts. Under this regime, your partner’s written consent is required in the case of the purchase of immovable property, cars, or financial investments. Likewise, you may not enter into a credit contract or bind yourself as surety without your partner’s written consent.

An Antenuptial contract must be signed before the marriage and registered within three months after signature at the deeds office. An Antenuptial contract will have to state pertinently that the accrual system is expressly excluded. 

JA Coetzee Attorneys offers a fully comprehensive Antenuptial Contract service to local and foreign 
couples including inter alia:

  • Initial one-hour consultation
  • Drafting a tailor-made Antenuptial Contract
  • Follow up consultation to sign the            Antenuptial Contract
  • A letter for your marriage officer confirming that the Antenuptial Contract has been executed
  • Lodging the Antenuptial Contract at the Deeds Office
  • Notifying you that the Antenuptial Contract has been registered and providing you with the original document for safekeeping.
In the absence of an Antenuptial Contract, the parties are married in Community of Property which 
means that their estates are joined, and they share assets and liabilities. 

Unfortunately, all debts incurred by one partner are debts of the joint estate which means that you may find yourself liable for your partner’s debts. Under this regime, your partner’s written consent is required in the case of the purchase of immovable property, cars, or financial investments. Likewise, you may not enter into a credit contract or bind yourself as surety without your partner’s written consent.

An Antenuptial contract must be signed before the marriage and registered within three months after signature at the deeds office. 
 An Antenuptial contract will have to state pertinently that the accrual system is expressly excluded. 

JA Coetzee Attorneys offers a fully comprehensive Antenuptial Contract service to local and foreign couples including inter alia:

• Initial one-hour consultation
• Drafting a tailor-made Antenuptial Contract
• Follow up consultation to sign the Antenuptial Contract
• A letter for your marriage officer confirming that the Antenuptial Contract has been executed 
• Lodging the Antenuptial Contract at the Deeds Office
• Notifying you that the Antenuptial Contract has been registered and providing you with the 
  original document for safekeeping.
How do the systems work?

If you are Married in 
Community of Property:

In terms of this marriage contract, both parties are the owners of the joint estate.

From the start of the marriage, all assets and liabilities are incorporated in a single, joint estate, with certain assets being excluded. Exclusions include awards of patrimonial damages (an amount of money awarded by a court to the spouse in a court case for loss suffered).  

Assets accumulated by one or both parties prior to the marriage also become part of the joint estate owned by both parties. Belief founded in common law dictated that property not forming part of the joint estate for instance a property bequeathed in terms of a will, will not be affected should the other spouse become insolvent. However, the judgement in Du Plessis v Pienaar NO and Others 2003 (1) SA 671 (SCA) has overruled this belief. 

The court held that the property falling outside the joint estate is relevant only between the spouses (inter partes) and has no legal ramifications against in case of insolvency. In the case, where there is insufficient property in the joint estate to satisfy the debts (meaning that all property of both spouses has already been sold to settle the debt but the value obtained on the sale was not enough to pay off the whole debt and there is still debt remaining), both spouses will be sequestrated (declared bankrupt). This is because both spouses are considered to have one joint estate- and if the estate of the husband is insolvent, then by virtue of it being joined together with the wife’s estate – both spouses will be declared bankrupt by the courts and vice versa. This makes it impossible for spouses married in community of property to protect its assets by holding them in the name of the spouse who has less debt and a lower risk of future debt.  

Some of the advantages of marriage in community of property are:

  • It is automatic without having to enter into a special contract.
  • If you are the financially weaker spouse, you get to share in the assets of your spouse.

Some of the disadvantages of marriage in community of property are:

  • The economically stronger spouse has to share his or her assets with his or her spouse.
  • The spouses are jointly liable for each other's debts. This is particularly problematic on insolvency as both spouses will be treated as insolvent (as explained above).
  • The joint administration of the estate is quite complicated.
  • While the marriage is a happy one, it is no real problem to obtain your spouse's consent. But when the marriage starts to fail, the requirement of joint consent is    difficult to satisfy.

A Marriage Out of Community of Property, without Accrual:

An Antenuptial Contract is a contract entered by spouses prior to the marriage being solemnized. The contract will govern the rules and conditions in respect of the division of assets which will apply during the marriage as well as in the event of a divorce or death. Spouses can include any provisions they want in their Antenuptial Contract as long as the provisions are not against the law or immoral. The most common reason why people elect to marry out of community of property is to protect their assets and their financial position before and during the marriage.

In the case of marriages out of community of property without accrual, the property owned by a person prior to the marriage, as well as all property accumulated during the marriage, belongs only to that person.

The same rule applies to liabilities. Each party’s debt remains his or her responsibility. Consequently, each party may deal arbitrarily with his or her estate in a will. 

Some of the advantages of marriage out of community of property and without the accrual system are:

  • Each spouse keeps his or her own assets and is free to deal with his or her own estate as he or she likes.
  • Spouses are generally not liable for each other's debts, but cognisance needs to be taken of the Insolvency Act. 
  • The financially stronger spouse does not have to share his or her estate with the weaker spouse.

Some of the disadvantages of marriage out of community of property and without the accrual system are:

  • The financially weaker spouse does not get to share in the estate of the stronger spouse, even though he/she may have contributed to the estate indirectly by putting their career on hold.

A Marriage Out of Community of Property with Accrual:

This system works in much the same way as a marriage out of community of property without accrual, except that upon dissolution of the marriage, either by death or divorce, the estates of the parties will be divided based on the accrual or profit. The Matrimonial Property Act states that the spouse whose estate shows no accrual or a smaller accrual than the estate of the other spouse acquires a claim against the spouse or his estate for an amount equal to half of the difference between the accrual of the respective estates of the spouses. The accrual is determined by calculating the difference in the net starting value and the net final value of the estate of each spouse with the exclusion of inheritances, legacies, and donations or any exclusion in terms of the ANC.

The calculation of the accrual can briefly and generally be summarised as follows: 
It is important to determine the value of the estate at the time the marriage is contracted.

  • The total net asset value of spouse A at the commencement of the marriage is R200 000,00.
  • The total net asset value of the spouse B at the commencement of the marriage is R50 000,00.
  • The total net assets value of spouse A at the dissolution of the marriage is R600 000,00.
  • The total net assets value of spouse B at the dissolution of the marriage is R100 000,00.

The accrual of the spouse A is calculated to be the difference between the value at the dissolution of the marriage and the value at the commencement of the marriage, in this case being R400 000,00.

The accrual of the spouse B is calculated in the same manner as above, in this case being R50 000, 00.

The Act then states that the one spouse acquires a claim against the other spouse for an amount equal to half of the difference between the accrual of the respective estates, namely R400 000,00 – R50 000,00= R350 000.00 divided by two. In the scenario mentioned the spouse B will, therefore, have a claim against the estate of the spouse A in the amount of R175 000,00.

Certain assets are excluded from the accrual in terms of the Matrimonial Property Act. These include, for example, the following:

  • An inheritance received during the duration of the marriage;
  • Donations made between the parties during the duration of the marriage;
  • Assets explicitly excluded in terms of the conditions of the marriage contract.

Although each marriage partner may bequeath his or her separate estate at his or her discretion, it should be borne in mind that in terms of the accrual system the other party may have a claim that will have to be finalised before the testamentary distribution can take place.

The testator could be prevented from bequeathing his estate as he wishes if, after settlement of all claims, there are not sufficient assets or funds in his estate to carry out his/ her wishes.
How do the systems work?

If you are Married in Community of Property:

In terms of this marriage contract, both parties are the owners of the joint estate.

From the start of the marriage, all assets and liabilities are incorporated in a single, joint estate, with certain assets being excluded. Exclusions include awards of patrimonial damages (an amount of money awarded by a court to the spouse in a court case for loss suffered).  

Assets accumulated by one or both parties prior to the marriage also become part of the joint estate owned by both parties. Belief founded in common law dictated that property not forming part of the joint estate for instance a property bequeathed in terms of a will, will not be affected should the other spouse become insolvent. However, the judgement in Du Plessis v Pienaar NO and Others 2003 (1) SA 671 (SCA) has overruled this belief. 

The court held that the property falling outside the joint estate is relevant only between the spouses (inter partes) and has no legal ramifications against in case of insolvency. In the case, where there is insufficient property in the joint estate to satisfy the debts (meaning that all property of both spouses has already been sold to settle the debt but the value obtained on the sale was not enough to pay off the whole debt and there is still debt remaining), both spouses will be sequestrated (declared bankrupt). This is because both spouses are considered to have one joint estate- and if the estate of the husband is insolvent, then by virtue of it being joined together with the wife’s estate – both spouses will be declared bankrupt by the courts and vice versa. This makes it impossible for spouses married in community of property to protect its assets by holding them in the name of the spouse who has less debt and a lower risk of future debt.  

Some of the advantages of marriage in community of property are:

• It is automatic without having to enter into a special contract.
• If you are the financially weaker spouse, you get to share in the assets of your spouse.

Some of the disadvantages of marriage in community of property are:

• The economically stronger spouse has to share his or her assets with his or her spouse.
• The spouses are jointly liable for each other's debts. This is particularly problematic on insolvency as both spouses will be treated as insolvent 
  (as explained above).
• The joint administration of the estate is quite complicated.
• While the marriage is a happy one, it is no real problem to obtain your spouse's consent. But when the marriage starts to fail, the requirement of joint consent is    difficult to satisfy.

A Marriage Out of Community of Property, without Accrual:

An Antenuptial Contract is a contract entered by spouses prior to the marriage being solemnized. The contract will govern the rules and conditions in respect of the division of assets which will apply during the marriage as well as in the event of a divorce or death. Spouses can include any provisions they want in their Antenuptial Contract as long as the provisions are not against the law or immoral. The most common reason why people elect to marry out of community of property is to protect their assets and their financial position before and during the marriage.

In the case of marriages out of community of property without accrual, the property owned by a person prior to the marriage, as well as all property accumulated during the marriage, belongs only to that person.

The same rule applies to liabilities. Each party’s debt remains his or her responsibility. Consequently, each party may deal arbitrarily with his or her estate in a will. 

Some of the advantages of marriage out of community of property and without the accrual system are:

  • Each spouse keeps his or her own assets and is free to deal with his or her own estate as he or she likes.
  • Spouses are generally not liable for each other's debts, but cognisance needs to be taken of the Insolvency Act.
  • The financially stronger spouse does not have to share his or her estate with the weaker spouse.

Some of the disadvantages of marriage out of community of property and without the accrual system are:

  • The financially weaker spouse does not get to share in the estate of the stronger spouse, even though he/she may have contributed to the estate indirectly by putting their career on hold.

A Marriage Out of Community of Property with Accrual:

This system works in much the same way as a marriage out of community of property without accrual, except that upon dissolution of the marriage, either by death or divorce, the estates of the parties will be divided based on the accrual or profit. The Matrimonial Property Act states that the spouse whose estate shows no accrual or a smaller accrual than the estate of the other spouse acquires a claim against the spouse or his estate for an amount equal to half of the difference between the accrual of the respective estates of the spouses. The accrual is determined by calculating the difference in the net starting value and the net final value of the estate of each spouse with the exclusion of inheritances, legacies, and donations or any exclusion in terms of the ANC.

The calculation of the accrual can briefly and generally be summarised as follows: It is important to determine the value of the estate at the time the marriage is contracted.

  • The total net asset value of spouse A at the commencement of the marriage is R200 000,00.
  • The total net asset value of the spouse B at the commencement of the marriage is R50 000,00.
  • The total net assets value of spouse A at the dissolution of the marriage is R600 000,00.
  • The total net assets value of spouse B at the dissolution of the marriage is R100 000,00.

The accrual of the spouse A is calculated to be the difference between the value at the dissolution of the marriage and the value at the commencement of the marriage, in this case being R400 000,00.

The accrual of the spouse B is calculated in the same manner as above, in this case being R50 000, 00.

The Act then states that the one spouse acquires a claim against the other spouse for an amount equal to half of the difference between the accrual of the respective estates, namely R400 000,00 – R50 000,00= R350 000.00 divided by two. In the scenario mentioned the spouse B will, therefore, have a claim against the estate of the spouse A in the amount of R175 000,00.

Certain assets are excluded from the accrual in terms of the Matrimonial Property Act. These include, for example, the following:

  • An inheritance received during the duration of the marriage;
  • Donations made between the parties during the duration of the marriage;
  • Assets explicitly excluded in terms of the conditions of the marriage contract.

Although each marriage partner may bequeath his or her separate estate at his or her discretion, it should be borne in mind that in terms of the accrual system the other party may have a claim that will have to be finalised before the testamentary distribution can take place.

The testator could be prevented from bequeathing his estate as he wishes if, after settlement of all claims, there are not sufficient assets or funds in his estate to carry out his/ her wishes.
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