In South Africa, civil marriages are solemnised in terms of the Marriages Act, 25 of 1961, or the Civil Union Act, 17 of 2006. An Antenuptial Contract or Pre-Civil Union Contract (also commonly referred to as a ‘prenup’), primarily governs what will happen to your assets and liabilities upon dissolution of your marriage. If you are already married in community of property and wish to change your matrimonial property regime to out of community of property, you will need to apply for a Postnuptial Contract – for more information, please visit our section on Postnuptial Contracts. South African law provides for two types of marriages, namely “In Community of Property” and “Out of Community of Property”. Your choice will determine your proprietary rights during your marriage and upon death or divorce.
If you and your fiancé do not sign a contract before marriage, you will be deemed to be married In Community of Property. This means that all assets and liabilities of either spouse will automatically become part of the joint estate upon marriage.
The potential consequences include the following:
- Should one spouse conduct his/her financial affairs recklessly, it will adversely affect the other spouse.
- All assets in the joint estate may become susceptible to the claims of creditors of both spouses and little can be done to afford adequate protection against this.
- For certain contractual obligations, such as suretyships and finance agreements, the consent of the other spouse is required.
- As joint owners of all property in the estate, both spouses will share equal rights of ownership in each other’s assets.
Should you wish to marry Out of Community of Property, you and your fiancé will need to enter into an Antenuptial Contract or Pre-Civil Union Contract prior to marriage.
In terms of the contract, you and your fiancé would agree that there shall be no community of property and no community of profit and loss during the subsistence of the marriage.
The implications of an Antenuptial Contract or Pre-Civil Union Contract include the following:
- Neither spouse shall be liable for the debts or obligations of the other by virtue of the marriage.
- Each spouse is entitled to retain his/her separate property with the freedom to deal with such property as he/she wishes.
- Should either spouse be sequestrated, the property of the other is protected from the insolvent’s creditors (subject to the provisions of Section 21 of the Insolvency Act).
Why Consider a Marriage Contract?
There are various reasons that spouses may choose to enter into an Antenuptial Contract or Pre-Civil Union Contract. Some of the common reasons include the following:
- To avoid being held jointly and severally liable for the debts or obligations incurred by one spouse prior to the marriage or during the marriage.
- To protect your own assets from claims brought against your spouse by creditors and other parties.
- You may own assets at the time of the marriage, which you intend to exclude from a joint estate.
- To exercise independence and freedom in financial transactions, without being required obtaining consent from your spouse.
With Accrual or Without Accrual?
The basis of an Antenuptial Contract is that it excludes community of property and community of profit or loss.
The Matrimonial Property Act of 1984 (the “Act”) provides two options, namely:
- with application of the accrual system; and
- without application of the accrual system.
Please note that if you and your spouse conclude an Antenuptial Contract, the accrual system will automatically apply unless it is expressly excluded.
Similarly, neither party shall be liable for any debt or obligation incurred by the other before or during the subsistence of their intended marriage.
With the application of the accrual system, both spouses would retain separate estates during the subsistence of the marriage and they would not necessarily share in each other’s profits or losses during the marriage. It is only upon dissolution of the marriage, whether by death or divorce, that the parties would be entitled to an accrual claim.
The ‘accrual’ is the extent to which each spouse has increased his/her respective estate by the time of dissolution of the marriage. The accrual of the estate of each spouse is the amount by which the value of his/her estate at the dissolution of the marriage exceeds the value thereof at the date of marriage.
The estate of the spouse that shows smaller growth during the marriage has a claim against the estate of the spouse that shows larger growth, for half of the difference. The result of calculating the accrual is that the spouses would ultimately share equally in the total accrual of both parties.
This calculation of the accrual is best illustrated by way of example:
|FIRST SPOUSE||SECOND SPOUSE|
|Commencement Value||100 000||NIL|
|Value at Date of Dissolution||1 000 000||2 000 000|
|LESS liabilities at Date of Dissolution||500 000||1 000 000|
|Current Value (at Date of Dissolution)||500 000||1 000 000|
(Current Value less Commencement Value)
|400 000||1 000 000|
|Larger growth: Second Spouse’s accrual||1 000 000|
|LESS Smaller growth: First Spouse’s accrual||400 000|
|Amount Second Spouse’s accrual exceeds First Spouse’s accrual||600 000|
|600 000 ÷ 2||300 000|
|Accrual of First Spouse’s estate||400 000|
|+ 300 000|
|Total payable to First Spouse||700 000|
|Accrual of Second Spouse’s estate||1 000 000|
|– 300 000|
|Total payable to Second Spouse||700 000|
In the above example, the First Spouse is entitled to half of R600,000 being a claim of R300,000 against the Second Spouse’s estate. R300,000 is therefore added to the First Spouse’s accrual and deducted from the Second Spouse’s accrual, so that each party leaves the marriage with R700,000.00 from the total accrued.
In an Antenuptial Contract, spouses are required to declare the net value of their respective estates at commencement of the marriage. If either party has no value in their estate, or if their debts at the time of marriage exceed the value of their property, the net value of that estate at commencement of the marriage is deemed to be nil. Generally, in the event that an estate has as a nil value upon commencement, everything owned upon dissolution of the marriage will be deemed to have accrued during subsistence of the marriage.
The net value of the estate of each spouse at the commencement of the marriage takes inflation into account. It is therefore calculated with allowance for any difference in the value of money that may exist at the time of commencement and at the dissolution of the marriage. For this purpose the weighted average of the Consumer Price Index or any index published in substitution thereof will be accepted as prima facie proof of any change in the value of money.
Certain property belonging to either spouse may not be taken into account when the accruals are calculated, including:
- Any amount which shall have accrued to such spouse’s estate by way of damages other than damages for patrimonial loss.
- All inheritances, legacies and donations which may accrue to either spouse during the subsistence of the marriage and all assets which either spouse may acquire by virtue of his / her possession or former possession of such inheritance, legacy or donation and income derived therefrom.
- Donations made by either spouse to the other, other than donations mortis causa.
Exclusion of the accrual system means that there will be no sharing of profit or loss by the spouses at any time.
Unless purchased jointly, all assets are owned completely separately, including those brought into the marriage and those acquired during the marriage.
Neither party shall be liable for any debt or obligation incurred by the other before or during the subsistence of their intended marriage.
As there is no sharing, neither spouse has any claim against the assets of the other upon death or divorce by virtue of the antenuptial contract.