Antenuptial Contract With and Without Accrual: A Complete 2024 Guide
Key Takeaways:
An antenuptial contract without accrual is a legal agreement entered into before marriage, defining the financial terms of the marital union.
This contract type maintains the financial independence of each spouse, with assets and liabilities kept separate throughout the marriage.
So you’ve finally found “the one,” and you’re ready to tie the knot — congratulations!
However, before you start shopping for venues and picking out rings, having an honest conversation about money and assets is essential. Getting married is a big decision that can influence your financial situation. There is an undoubted comfort to knowing you have avoided difficulties later down the line.
The solution? An antenuptial contract without accrual.
An antenuptial agreement, otherwise termed a prenup, is a marriage contract that allows you and your partner to specify how your debt and assets will be split following divorce.
This has to be signed by you and a Notary Public before your marriage. not every attorney is a qualified Notary Public so make sure to check whether your attorney is in fact a qualified notary public or not and what your options can be from there.
Without one, the court will decide for you according to the laws of your state. A prenup gives you the control and peace of mind to focus on enjoying this exciting new chapter of your life.
Here’s what you need to know to put an antenuptial contract in place before walking down the aisle.
What Is an Antenuptial Contract Without Accrual?
If you’re pondering the meaning of ANC without accrual, it’s a legal agreement signed before marriage that keeps your assets accumulated separate from your partner’s. This is signed by a notary public before your marriage.
Why Consider ANC Without Accrual?
Here are four good reasons to consider an antenuptial contract without accrual:
You want to pass on your assets to beneficiaries (e.g. children from previous marriages).
You have significantly more assets or earning potential than your spouse.
You own valuable property, investments or a business you want to retain control of.
You simply want clarity on what belongs to whom for your financial planning.
While not the most romantic thing to discuss before your wedding, an antenuptial contract without accrual can save you from potential disputes and complications. It may be awkward, but consider making this a priority for the sake of your financial future together.
How Does an ANC Without Accrual Work in South Africa?
An antenuptial contract (ANC) without accrual means that each spouse controls their assets completely. There’s no combining or sharing of assets accumulated during the marriage. What you bring into the marriage remains yours, and what your spouse brings in remains theirs.
How It Works:
With an ANC without accrual, any inheritance, gift or asset you acquired before or during the marriage remains your sole property. The same applies to your spouse. Neither of you has a claim to the other’s assets.
Here’s more info on how it works:
If you sell an asset you owned before the marriage, the proceeds remain yours alone.
Any income or profits generated from your premarital assets remain your separate property.
Assets purchased during the marriage with your separate funds stay separate.
This type of ANC offers maximum protection of assets but provides little security for the financially weaker spouse. There’s no division of assets in the event of divorce. Each person leaves the marriage with what they brought in and accumulated themselves.
For some couples, an ANC without accrual gives peace of mind that their premarital property and assets will remain under their control. However, others may prefer an ANC with accrual, which provides for some sharing of assets accumulated during the marriage to balance financial security for both spouses. The option you choose depends on your unique situation and financial goals.
Speaking with a legal professional regarding antenuptial contracts and asset protection in South Africa can help determine what best suits your needs before walking down the aisle. Making these critical financial decisions with your future spouse will help set the proper foundation for your marriage.
How Does an ANC Without Accrual Affect Property in Marriage?
Once you sign an antenuptial contract without accrual, how does it affect the ownership of assets during your marriage?
This type of agreement keeps most assets and debts separate, with a few exceptions, as we’ll see below.
1. Property Owned Before Marriage
Any property (house, car, investments, etc.) you owned before getting married remains your separate property. Your spouse maintains no ownership or interest in these assets. If you sell an asset you owned before marriage and buy another one, the new asset is also considered your separate property.
2. Gifts and Inheritances
Any gifts or inheritances you receive during marriage also remain your separate property. However, if you blend funds by depositing them into a joint account or using them to purchase a joint asset, they may lose their separate property status. Keeping gifts and inheritances in accounts solely in your name keeps them separate.
3. Joint Assets
The only assets you jointly own with your spouse are those you intentionally purchase together during marriage, such as a house, vehicle, or investment account in both your names. You each own an equal, undivided interest in these joint assets.
4. Debts
In most cases, debts incurred during marriage remain the responsibility of the spouse who acquired them. However, joint debts—like mortgages, auto loans, and credit cards in both of your names—are shared equally between you and your spouse.
A prenuptial agreement in South Africa, without accrual, clarifies how assets and debts are owned and divided, both during marriage and in the event of divorce.
However, for the best protection, keep good records of what property you brought into the marriage and any gifts or inheritances received. And think carefully before taking on any joint financial obligations with your spouse.
Both parties are legally obliged to offer financial support to one another, should one of them be unable to support himself/herself.
3 Disadvantages of Antenuptial Contract with Accrual
Signing an antenuptial contract isn’t for everyone.
Here are three downsides to look into before you sign on the dotted line with your partner:
Loss of spousal benefits
Potential reduced romance
Inflexibility
1. Loss of Spousal Benefits
If you sign an antenuptial agreement waiving certain marital rights, you may lose access to benefits like spousal and financial support, inheritance, or insurance policies. For instance, if you and your spouse divorce, the marriage contract may prevent you from receiving alimony or a share of their retirement accounts.
Similarly, if your spouse predeceases you, the agreement could bar you from inheriting a portion of their property following the administration of the deceased’s estate.
2. Potential Reduced Romance
Discussing finances and legal matters before the wedding may feel unromantic to some couples. More particularly, negotiating the terms of an antenuptial agreement can bring up sensitive issues that introduce stress, conflict and damaged trust at a time when you’re supposed to be celebrating your relationship. Reach out to experts in the field to approach the topic correctly.
3. Inflexibility
An antenuptial agreement is legally binding, meaning its terms are generally difficult to change once signed. Your financial and personal circumstances may evolve significantly over the years, but the agreement will likely remain static.
If it’s too restrictive or fails to account for unforeseeable life events, you could end up worse off down the road. Hence, it’s best to build flexibility into the agreement wherever possible.
Discussing the pros and cons with your partner and consulting an attorney before signing an antenuptial agreement is critical. Make sure you fully understand how it may impact you both now and in the years to come.
With open communication and legal guidance, you can craft an agreement that protects your interests without putting unnecessary strain on your relationship.
Frequently Asked Questions
Are Accruals Necessary?
Accruals are helpful but not always necessary.
An antenuptial contract without accrual means that each spouse will keep their separate property (assets owned before the marriage) separate if they divorce. This can provide peace of mind that your premarital assets like a house, investments, or business will remain your own if the marriage ends.
On the other hand, an accrual clause provides for the growth in value of separate assets during the marriage to be shared, which may not suit your needs or goals.
The fact that you don’t have complete autonomy over your assets is one of the key disadvantages of an antenuptial contract with accrual. A “without accrual” contract helps circumvent this issue, keeping all separate property and any value growth separate.
What Should I Consider Before Signing an ANC Without Accrual?
Here are five vital aspects to consider when entering an antenuptial contract without accrual:
How will joint property (assets acquired during marriage) be divided? Will it be a 50/50 split or some other percentage?
How will the increase in the value of joint property be distributed?
Will spousal maintenance (alimony) be waived or provided for?
How will debts be distributed between spouses?
Consider consulting with legal personnel and finance professionals to explore your options thoroughly.
Look at common question’s here about ANC considerations.
An antenuptial contract without accrual can provide reassurance and security for spouses entering into marriage by clearly defining what assets will remain separate should the relationship end. Open communication allows you to craft an agreement that suits your unique situation and needs.
What does it mean to be married in community of property
Covered already briefly above, 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.
And this can be a real problem.
What does it mean to be married out of community of property
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 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.
And that seems fair.
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 (except for patrimonial damages).
Ok, but how does one go about determining an accrual?
Easy peasy -
firstly, draft a list of all the assets, such as immovable property, furniture, vehicles, pension interest, annuities, policies, investments, bank accounts and interests such as shares and loan accounts in companies/partnerships/trusts or any other form of business, etc. obtained during the marriage at the present day values;
start by deducting the assets that were excluded in the ANC, as well as any other assets acquired by virtue of the possession, or former possession, of the excluded assets;
then deduct inheritances, legacies or donations, as well as any other asset acquired by virtue of the possession, or former possession, of the inheritances, legacies or donations;
once again deduct any debts and liabilities,
and lastly deduct the commencement value, as stated in the ANC and adjusted by CPI.
The net result will be the accrual in the estate.
The initial value of a spouse’s estate must be declared either in the ANC or a separate statement made not later than six months after the marriage, failing which the initial value will be deemed to be nil.
That’s great, but how does it work? Practically speaking…
As an example - 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, 750,000,00 less (b) 100,000,00—2,650,000.00
Miss is entitled to claim one-half thereof from the estate of Mr.— 1,325,000.00
Conclusion
An antenuptial contract without accrual is critical to protect what’s yours before walking down the aisle. While the conversation may be awkward, the peace of mind is well worth it. Speak to your partner openly and honestly, seek legal counsel, and draft an agreement you’re both comfortable with.
Marriage is a big step, but with the proper precautions, you can confidently embark on this new chapter of life, knowing you’ve safeguarded your financial and personal interests. Take a read into the accrual System.
Don’t leave it until after the honeymoon — make it a priority to set up an antenuptial agreement without accrual before you say, “I do.” You owe it to yourself and your relationship to start this lifelong partnership on the right foot — contact us now at Benaters to get started.