The Ins and Outs of Marriage Contracts in South Africa

Congratulations! The question has been asked and she said “Yes”. Someone’s getting married. So much to do and plan: book the wedding venue; choose the wedding dress; plan the procession, etc. etc. It’s all so exciting that you might forget the most important part i.e. that ever important marriage contract aka choosing the right matrimonial property regime. There are three matrimonial property regimes that are recognised in South Africa in terms of the common law and the Matrimonial Property Act, 1984. These are:

• The marriage in community of property
• The marriage out of community of property with the inclusion of the accrual system
• The marriage out of community of property with the exclusion of the accrual system

Which one you choose will determine whether you will need to entering into an antenuptial contract (commonly referred to as an “ANC”) prior to your marriage.

Marriage in Community of Property

This applies automatically where parties do not conclude an ANC, either by choice, by omission, or by ignorance of the law. All assets and liabilities of spouses married in community, whether acquired before or during the marriage, fall within one joint estate. One major pitfall of this system is that, should one spouse have large debts and become insolvent, the assets of both spouses will, except in exceptional circumstances, form part of the joint insolvent estate and be subject to distribution amongst the creditors. Also, a particularly important consideration for commercial purposes is the fact that the consent of both spouses may be required to buy, sell or encumber certain assets.

Upon dissolution of the marriage by way of a decree of divorce, the joint estate will be divided equally between the spouses. Similarly, if the marriage is dissolved by way of death of one of the spouses, half of the joint estate will automatically accrue to the surviving spouse and the deceased spouse can thus only deal with his half share of the joint estate in his or her will.

Marriage out of Community of Property

Your ANC is one of the most important documents you will sign in your lifetime as it governs what will happen to all your assets and liabilities on death or divorce. An ANC must be executed in front of a Notary Public before the marriage. The Notary Public is then obligated to attend to the registration of the ANC before the Registrar of Deeds at the Deeds Office within 3 months of the conclusion of your marriage. The benefits of entering into an ANC are as follows:

• Each spouse has, and maintains, a completely separate estate.
• Each spouse has and retains absolute independence of contractual capacity; and each spouse’s assets are protected against claims by the other spouse’s creditors.
• Each is liable for his or her own debt. There is no provision for sharing.

You can be married out of community of property either with or without the inclusion of the Accrual system. Unless the accrual system is specifically excluded in the ANC, the accrual system will apply automatically to all marriages out of community of property.

 

• Without Application of the Accrual System

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 will 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 ANC.

 

• With Application of the Accrual System

Application of the accrual system may be considered as the “fairer” option as it offers the protection of marriage concluded out of community of property, while acknowledging the marital partnership by allowing for sharing of assets that are accrued during marriage.

With application of the accrual system, both spouses also have separate estates during the subsistence of the marriage and they do not share in each other’s profits or losses during the marriage. Although neither spouse is liable for the other spouse’s debts or obligations, the parties will be entitled to an equal share of the assets that were acquired during the subsistence of the marriage, upon dissolution of the marriage. Where the marriage is dissolved by death, the accrual claim must be paid prior to any testamentary dispositions.

The ‘accrual’ is the extent to which each spouse has increased his/her respective estate by the time of dissolution of the marriage. Thus, the accrual of the estate of each spouse is the amount by which the value of his or her estate, at the dissolution of the marriage, exceeds the value thereof at the date of marriage.

The result of calculating the accrual is that each spouse shares equally in the total accrual of both parties. Essentially, the formula provides that the estate that shows smaller growth during the marriage has a claim against the estate that shows larger growth, for half the difference.

In the ANC, the spouses are required to declare the nett value of their respective assets at commencement of the marriage. If either party has no value in their estate, or their debts at the time of the marriage exceed the value of their property, the nett value of that estate at commencement of the marriage is regarded as 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.

Certain property belonging to either spouse may not be taken into account when the accruals are calculated, including:

• Amounts that accrue to a spouse’s estate by way of damages;
• Inheritances, legacies and donations which may accrue to either spouse during the subsistence of the marriage;
• Donations made by either spouse to the other.

 

Post-nuptial Contracts

But never fear, if you never concluded that all important ANC, It is possible to change your matrimonial property regime from “in” to “out” of community of property by registration of a Post-nuptial Contract in terms of the Matrimonial Property Act. The effects of the contracts are the same; however, the procedure is different.

The procedure involves a joint application to the High Court by the husband and wife, requesting the Court to grant the parties leave to sign a Notarial Contract (having the effect of a postnuptial contract), which after registration will regulate their matrimonial property system.

In order for the parties to change their matrimonial property system, the Act provides the following requirements:

• Sound reasons for the proposed change.
• Sufficient notice of the proposed change must be given to all creditors and the Registrar of Deeds
• The court must be satisfied that no other person will be prejudiced by the change.

But be warned: this High Court application can be a costly exercise. In addition to the drafting fee it also involves legal fees, notice to the Registrar of Deeds and costs of the publishing notices in two newspapers and the Government Gazette. The costs may escalate in the event that the application is opposed, and the postage costs may vary depending on the number of creditors.

 

Final thought

Okay Lovebirds, go and get that ANC sorted out. It is strongly recommended!

 

Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.