What is an antenuptial contract?
An antenuptial contract (ANC) dictates the type of marital regime that will be applicable to your upcoming marriage. There two different marital regimes, namely in community of property and out of community of property.
The Matrimonial Property Act 88 of 1984 is primary source of legislation that defines the proprietary consequences of a marriage and sets out the different types of marital regimes that may be applicable to a marriage. Accordingly, should you not have an ANC your marriage will automatically be in community of property. An ANC is necessary to prevent this and renders your marriage to be out of community of property.
The proprietary consequence of a marriage in community of property means that you and your new spouse, from date of marriage onwards, will be regarded as one single joint estate. A joint estate comprises of joint debt and joint liabilities and results in both spouses being jointly liable for any liabilities contracted jointly or separately by either spouse prior to marriage. Similarly, both spouses will also be equal shareholders of any assets of the joint estate.
A consequence of the joint estate is that the contractual capacity of both spouses is fairly limited, as the consent of spouses will always be required when entering into any agreement that binds the joint estate.
The proprietary consequences of a marriage out of community of property, through the registration of an ANC, grants both spouses the benefit of having separate estates. These results in an added bonus that spouses do not lose their individual identities after marriage. Therefore the benefit is that individual spouses will be able to contract and grow their individual estates without placing their spouse’s assets at risk.
The ANC with the inclusion of the accrual system is a variation of the separate estate concept. It allows either spouse to retain their individual assets that they have introduced to the marriage, however, at the termination of the marriage it entitles the spouse who has a smaller estate to a 50% share in the difference between the two estates. Therefore the spouse with the greater estate at the end of the marriage must pay over to the other 50 % of the difference between the two estates. In some respect the marriage out of community of property, with the inclusion of the accrual system, can be seen as the best of both worlds due to you having separate estates but still sharing in the growth of the assets acquired during the subsistence of the marriage.
The accrual system is governed by Chapter 1 of the Matrimonial Property Act 88 of 1984, which states that all marriages out of community of property are automatically subject to the accrual system, unless specifically excluded in the ANC. A salient feature of the ANC with the inclusion of the accrual system is that specific assets can be excluded by a spouse from the calculation of the accrual at the termination of the marriage. Majority of spouses entering into a second marriage take full advantage of this opportunity to protect themselves after learning a hard lesson from the first marriage.
Procedurally, once the terms of an ANC have been agreed upon, both spouses need to sign the ANC before a notary. It must be remembered that the ANC can only be signed before marriage. Should the parties only realise the need for an ANC after marriage, a High Court application will need to be made in terms of section 21(1) of the Matrimonial Property Act for the late execution and registration of the ANC. This may be a very lengthy and costly procedure which can easily be avoided.
After signature of the ANC before the notary the ANC needs to be registered in the Deeds Registries Office within three months of date of marriage for it to be valid and enforceable.
Why enter into an antenuptial contract?
The question that should really be asked is: Why not enter into an ANC?
Majority of couples get caught up in the wedding planning and preparation stress and not much thought is given to the preparation of the ANC. The most memorable day of your life could also be the commencement of a never ending financial nightmare, due to the absence of proper planning.
Considerations like the following should be taken into account:
- Have you thought that you may also be taking over your spouse’s existing debt and helping them provide more security to their creditors by introducing your assets to the joint estate?
- Further, do you anticipate yourself working in the same company for the rest of your life? In South Africa’s growing economy, everyone wants to be an entrepreneur and become their own boss. Consider the possibility of the business collapsing and you losing all the assets that you and your spouse worked so hard to acquire
A vital and integral component to risk management is proper planning; be smart and plan for your future – contact our offices for a consultation to discuss the different types of ANCs and to determine how we can protect you and your future spouse.