Protecting Your Assets in a Divorce
The news of Kim Kardashian divorcing her husband after 72 days of marriage, highlights why it is important for business owners to make sure that their marital regime is governed in terms of an Antenuptial contract . An Antenuptial contract is the most cost-efficient and reliable pre-marital contract that can protect business assets in the unlikely event of a divorce. An Antenuptial contract is a pre-marital contract between two parties entering into a marriage which regulates what happens to a spouse’s assets at the time of a divorce. It sets forth how marital property will be divided in the event of a divorce.
A well drafted Antenuptial contract can save you time and money on litigation costs during a divorce and prevent a battle over the ownership of a business and other assets. The more issues covered in the Antenuptial contract, means one less issue to litigate over during a divorce. Therefore, it is a prudent investment to make prior to getting married. One of the most important provisions a business owner can have in a Antenuptial contract is a provision addressing the appreciation of individual pre-marital assets (assets you possess prior to entering the marriage).
For example, let’s say your business, an asset, is worth R 6 million prior to getting married. At the end of your divorce, your asset is worth R 12 million. Your spouse could be entitled to half or more of the R 12 million appreciation during the marriage. However, if you have a valid and enforceable Antenuptial contract whereby you and your partner agree that pre-marital property and any growth thereon is excluded at the start of the marriage, then such assets will not be taken into account for purposes of an accrual.
Marrying in terms of an Antenuptial contract (out of community of property) can also help limit your liability for your future spouse’s debts and prevent you from inheriting this debt during the marriage and divorce. Remember, creditors can go after marital property- i.e., your business if you are married in community of property.
Antenuptial contracts may be unenforceable if certain formalities are not followed. A common attack to a Antenuptial contract is if both spouses were represented by the same attorney or one spouse was forced into the contract and did not really know what the consequences are. It is critical for you and your spouse to have separate attorneys who are independent of one another during the drafting and negotiation of the Antenuptial contract or at least, if you do go to one attorney, make sure that the attorney explains the pro’s and con’s and give the other spouse and option to discuss the agreement with another attorney.
An Antenuptial contract or pre-nuptial agreement must be entered into before marriage through a notary public, if not the marital regime by default will be that you are married in community of property. To change your marital regime later after divorce is costly and can only be accomplished by way of a court application in the High Court.
Another requirement for a valid and enforceable Antenuptial contract agreement includes the use of clear language in the agreement and terms that are fair. It is important both you and your future spouse have sufficient time to review, negotiate and execute the Antenuptial contract. You and your future spouse want to avoid reviewing and signing the Antenuptial contract six hours before the wedding and while under duress. Therefore, you should both have sufficient time to review the Antenuptial contract and formally execute it. By undertaking these measures, you can protect your business and assets with a valid and enforceable Antenuptial contract.