All About Ante Nuptial Contracts
Key Takeaways:
Ante-nuptial contracts detail spouses' financial arrangements, offering legal clarity.
Covering assets, debts, and potential divorce and death outcomes.
Legal consultation with a Notary is vital for creating a customised, enforceable contract aligned with spouses' intentions.
You are about to say “I do.” At Benaters we know first-hand, how exciting this time is for you! But amidst all this excitement, don’t forget that besides saying “I do” and all the pomp and pageantry that comes with your wedding ceremony, there are still some important legal concerns that you and your spouse-to-be will need to take into consideration before your big day.
What are we talking about?
Your Marital Regime
Your matrimonial property (“marital”) regime of course.
Choosing your marital regime entails deciding on how you will be married (in a financial and proprietary way). And this is an important decision as it will affect your and your spouse’s estates in the future, both during your marriage as well as when it is dissolved (either by death or divorce). And this big decision, should not be taken lightly.
What this big decision essentially comes down to is choosing how you will treat your respective estates – it could be in a:
“what is mine is ours” regime,
or in a “what is mine is mine” regime
or in a regime that says, “from this day on our estates are separate but we share the growth moving forward (depending on the accrual)”….
Of course, when deciding on one of the above marital regimes, the entering into of a marriage contract becomes relevant.
Marriage Contracts
A marriage contract, a prenuptial contract, an ante nuptial contract (ANC) or premarital contract are basically different names for the same type of thing. Most commonly, referred to as a prenup or an ANC (especially in South Africa, where the term “ANC” is more commonly used).
The ANC will be the most important contract that a married couple will ever sign together. Entered into before marriage, the purpose of the contract is to amend the “automatic financial consequences” of a marriage (as found under marriages in community of property) - once the couple ties the knot. The ANC allows the couple to tailor-make their own matrimonial property regime. They can include any provisions they like in their ANC, provided the provisions are not against the law, good morals or the nature of marriage.
But a couple needs to choose and decide wisely because changing the provisions of an ANC can be problematic a few years down the line – think about it - the ANC dictates the financial and proprietary consequences of the couple’s future and can affect the rights of the couple’s creditors, should something go awry (financially speaking anyway).
Your ANC will be particularly important if you are bringing considerable wealth or assets into your marriage and want to retain (or protect) those if the marriage fails or if you have been married before and want to retain your existing property for your child(ren) (as an example).
As you can tell, it is an important and often emotionally charged decision and it is always crucial for the couple to seek proper legal advice before making any final decisions on which marital regime to choose.
But in an effort to help, (and in the interim) as a means to guide you only, here are the three marital regimes that you can choose from -
Married in Community of Property
“What is mine, is ours.”
Being married in community of property happens automatically if an ANC is not drawn up. It means that there will be only one estate between a husband and wife throughout the term of their marriage.
A husband and wife will share the risks and the benefits of their joint estate. Everything the couple has ever earned or spent and earns or spends after their marriage will form part of this joint estate. Meaning that no asset can be physically divided and you and your spouse will share equally in the profits and losses regardless of your financial contribution.
When you are married in community of property, certain transactions will require the consent of your spouse, while others will not. For example, starting a company, trading shares, or selling movable assets do not require consent from your spouse. Buying property, applying for a home loan or credit on the other hand, will.
One of the biggest disadvantages to couples who are married in community of property is that you are responsible for all debt incurred by your partner – this includes debt that was incurred before your marriage. All contractual debt, such as personal loans, credit card debt, and even maintenance and child support from a previous marriage. It is all included. The implication for couples married in community of property is that there is no safety net of having separate estates to safeguard the family’s finances.
If one of you is declared insolvent or creditors come knocking on your spouse’s door, you will both be liable for the outstanding debts. Furthermore, if your partner does not have money to pay the debt, you can be held responsible for the full debt.
Married Out of Community of Property
“What is mine is mine.”
It’s as simple as saying – “what is mine is mine and what is yours is yours”. It sounds precocious and rather pedestrian. But when it boils down to it, that’s what being married out of community of property means.
To be married out of community of property you need to enter into an ANC which will stipulate the terms and conditions for the exclusion of community of property between spouses. Each spouse usually retains their separate property and will have complete freedom to deal with their property as they deem fit. If one spouse is declared insolvent, the other spouse’s property is protected from the insolvent spouse’s creditors.
But it does get a little more complicated than simply excluding the community of property. The issue of accrual now arises – either getting married out of community of property without accrual or with accrual.
But what is this “accrual”?
The term ‘accrual’ means the net increase in value of one spouse or parties’ estate since the date of marriage. In other words, what was yours before the marriage remains yours, and what you have earned during the marriage belongs to both of you. Because the right to share in accrual is exercisable only upon dissolution of the marriage, such a right is not transferable and cannot be attached by creditors during the subsistence of the marriage.
The accrual system is therefore a formula that is used to calculate how much the spouse with the larger estate must pay the smaller estate if the marriage comes to an end through death or divorce. Only property acquired during the marriage can be considered when calculating the accrual.
When the accrual is included, a spouse will be entitled to share in the growth of the two estates at death or divorce.
The underlying philosophy of the accrual system is that each spouse is entitled to take out the asset value that he or she brought into the marriage, and then they share what they have built up during the marriage, together.
How does an accrual system work? Practically speaking…
As an example, say you are married out of community of property but with accrual. And your spouse passes away. At the commencement of the marriage, Mr. declared R 100,000 and Miss declared nil in their ANC. At the dissolution of the marriage on Mr.’s death the respective net market values of their estates assets are Mr. R 3,000,000 and Miss R 100,000. At the date of the marriage the official CPI was 120 and at Mr.’s death it is 300:
Mr.’s estate:
Net value (assets minus admin costs and liabilities) at death | 3,000,000.00
Less: Net value declared at commencement of marriage | 100,000.00
Adjusted for Consumer Price Index 300 X 100,000 ÷ 120 | 250,000.00
Net value of accrual (a) | 2,750,000.00
Miss’s estate:
Net value (assets minus liabilities) at death of Mr. | 100,000.00
Less: Net value declared at commencement of marriage | nil
Net value of accrual (b) | 100,000.00
Difference between accruals: (a) 2, 750, 00 less (b) 100,000 | 2,650,000.00
Miss is entitled to claim one-half thereof from the estate of Mr. | 1,325,000.00
Are any assets excluded from the accrual?
In a word — yes.
The following assets are not considered in determining accruals i.e. they are not included in the net value of estate assets:
any asset excluded from the accrual system under the ANC as well as any other asset acquired by a spouse or party due to the fact that he/she already possessed same prior to the marriage;
an inheritance, legacy or donation belonging to one of the spouse’s (during the marriage); The caveat here is this – if the spouses agreed to share in the inheritance, legacy or donation in their ANC or the inheritance, legacy or donation was left to both of them jointly;
any donation between the spouses is not considered in either estate, and
any damages claim awarded to a spouse (bar patrimonial damages).
But what about marriage out of community of property without accrual?
If you get married out of community of property with accrual, each person keeps their assets and liabilities acquired before they got married as is, but they then share in the profit and/or loss of the estate incurred during the subsistence of the marriage i.e. what’s mine is mine until we get married, then it becomes “ours”.
But without community of property and without accrual – there is a lot of “without’s” - it basically amounts to “what is mine, stays mine”. If there is no accrual (and no assets are excluded in the ANC), then the spouses have their own estates which contain property and debts acquired prior to and during the marriage – nothing is shared. In other words, the value of each party’s estate at the commencement of the marriage is deemed to be nil.
Meaning that each party involved in the marriage will remain individual and their estates separate. Basically - assets and liabilities acquired individually before the marriage form part of their separate estates and assets and liabilities acquired during the course of the marriage will also remain separate.
In this situation, if the parties divorce or when one spouse passes away, each party will attain their own individual assets and liabilities. There can also be no claim for a transfer of assets. Spouses who are married out of community of property have separate estates and are not liable for each other’s debts.
So in a divorce, everyone leaves the marriage clean. And this can be beneficial in particularly acrimonious litigation.
There is a lot to take in and important information that needs to be considered before a couple chooses their marital regime. So get the right help. Get help that will advise you with care and understanding, whilst cheering for you as you walk down the aisle.
What can we do for you?
With our all-inclusive fee of R4 950 (including VAT), it includes the following services:
Taking instructions – we chat to you and your spouse-to-be face to face, finding out a little bit more about you and what your intentions (with regards to your estates) are going forward;
Drafting of the ANC – we draft an antenuptial contract that will be bespoke just for you, taking into account all your wishes for your future together;
Tending to signature before a Notary Public and notarising of Contract by Notary Public – as notary publics ourselves this process is made a lot easier.
Tending to registration at Deeds Office – this can vary in time depending on how busy the Deed’s office is. But we remain resilient in the hopes of getting your ANC back as soon as possible;
Sending back the original ANC to you after receipt from the Deeds Office – time to celebrate!
We so look forward to celebrating this momentous milestone with you!