The Ante Nuptial Contract governs what will happen to all assets and liabilities on death or divorce.
An Ante Nuptial Contract must be executed before a notary public, who is a qualified attorney with additional specialist qualifications.
There are three matrimonial property regimes in South Africa:
Marriage in community of property
This regime applies automatically where parties do not conclude an Ante Nuptial Contract, either by choice, by omission, or by ignorance of the law.
When parties marry in community of property, all their assets and liabilities, whether acquired before or during the marriage, fall within one joint estate.
Although this is the truest form of sharing, it is extremely risky for parties conducting their own businesses or incurring debts, and often limits parties’ contractual capacities as the joint estate is being bound and contracting parties will wish to have both spouses party to any contract.
A useful analogy is that of a pot of soup into which both parties’ assets and liabilities are placed. Marriage starts the pot of soup boiling and it is impossible to distinguish which water, which spices, which meat and which vegetables were placed in the pot by whom.
If a creditor is owed money by either spouse he simply comes to the pot of soup and ladles out the amount he is owed; whether one spouse perceives an asset to be “owned” by him or her, the fact is that it is “owned” by the joint estate and a creditor is not obliged to tell the difference but can seek satisfaction from the entire joint estate.
Marriage out of community of property (“straight”- no accrual)
Continuing with our soup analogy, this regime can be likened to two completely separate bowls of soup. Each party has, and maintains, a completely separate estate.
Irrespective of who (the parties themselves or even a third party) puts what into each person’s bowl of soup, the party who owns the bowl of soup is the owner of its contents before, during and after the marriage.
Neither spouse is liable for the debts or obligations of the other. 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.
This clearly gives parties absolute independence of contractual capacity and protects the estates of each party against claims by the other party’s creditors, but there is no provision for any sharing whatsoever.
A party who contributed to the other party’s estate whether in cash or otherwise would have a heavy onus to prove that he or she was entitled to anything from that party’s estate on dissolution of the marriage.
Where one party stays at home to raise children and does not contribute financially towards the marriage, and the other spouse works and accumulates assets, the former may find herself with nothing and no claim to the assets of the latter.
Marriage out of community of property with inclusion of the accrual system
In 1984 the legislature enacted the Matrimonial Property Act 88 of 1984.The accrual system which derives from this Act was devised to permit a form of sharing, consistent with the primary objective of marriage, but permitting retention of each party’s independence of contract and ability to retain their own separate estates.
Applying the soup bowl analogy to accrual is a little more difficult since various scenarios can apply. What is of importance, however, is that each party retains his or her own soup bowl, filled with his or her own ingredients, throughout the course of the marriage.
However, contrary to a marriage out of community of property (“straight”), a provision is made for sharing the contents of the bowls at the dissolution of the marriage.
The important features of an accrual marriage are in essence the following:
- Each party retains his or her own estate.
- He or she may accumulate assets and incur liabilities without interference from or assistance of the other spouse.
- The estate of each party is determinable separately from that of the other party.
- At dissolution of the marriage, the estate of each party is calculated by listing all assets, listing all liabilities, subtracting liabilities from assets and arriving at a nett asset value.
- In simplistic terms the monetary value of the smaller estate is subtracted from the monetary value of the larger estate, the difference is split, and the party having the larger estate pays half of the difference between the two estates to the party with the smaller estate.
- In practical terms this amounts to a similar division to a marriage in community of property BUT WITH THE PROTECTION OF OUT OF COMMUNITY THROWN IN!.
However there are certain crucial factors of an accrual marriage which add complexity and much more freedom of choice:
- At the commencement of the marriage, when drawing up the Ante Nuptial Contract, the parties can each decide to exclude certain assets. The effect of excluding an asset will be that it does not feature on the asset statement at dissolution of the marriage and is thus completely excluded from the sharing calculation. For an asset to be excluded it should be properly described and the party should be quite clear as to exactly what he or she contemplates excluding. An asset which is not properly described can cause havoc when the executor or the divorce attorney is trying to decide what to do with it in calculating the nett accrual value.
- Parties not wishing to exclude specific assets may nevertheless exclude a certain sum of money which is the agreed equivalent of assets which they do not wish to share, and which is termed a “commencement value”. This commencement value does not have to (and in fact should not be) be linked by description to specific assets, and will be accelerated by the value of money to its present day value on dissolution of the marriage.
- To exclude either a specific asset, or a commencement value, or both (which must be separate and not derived from the same asset), can effectively ensure that spouses share only what they choose to share and keep separate any item or items, or values, which they do not believe it fair to share (for example something acquired before the relationship commenced).
- Parties may even include a blanket clause that they wish the sharing to commence only from the date on which the marriage is concluded, in which event everything acquired by either of them prior to the date of marriage will be excluded (although the proceeds from any such assets, if any, will not be excluded unless this is specifically detailed).
Although all of the above may appear to be simple, parties should work through various examples and should express, with reference to specific assets, exactly what their intention is to ensure that the Ante Nuptial Contract is drafted in accordance with their specific wishes.
Work through your assets/wishes as if you were at the stage of dissolution of the marriage and try to anticipate any problems which may arise.
The contract can then be drafted to eliminate any such problems or cater for them as best possible in the circumstances.
An important point to remember is that an Ante Nuptial Contract must be signed before the marriage is concluded and must be signed in the presence of a notary and two competent witnesses.
The notary will then register the contract in the local registry of deeds.
Now that you’re up to speed with the Ante Nuptial Contract don’t forget to draw up a will!
– Jason de Mink
BA LLB LLM (UCT)
021 911 2097