Think before you get married
The short-lived “marriage” between the DA’s Helen Zille and Agang SA’s Mamphela Ramphele might be old news for some but a marriage without the existence of an Antenuptial contract or “ANC” can have devastated consequences for the parties involved not only during the course of the marriage but also in the unlikely event of a divorce. Therefore if you do get married make sure your paperwork is in order before the big day otherwise the damage may be substantial. Unfortunately, as in the case in question parties focus so much on the marriage ceremony itself that they completely forget the implications of neglecting to make an informed decision regarding the marriage regime, in the unlikely event that they do divorce.
In accordance with the Matrimonial Property Act 88 of 1984, which came into operation on 1 November 1984, there are three forms of matrimonial property regimes in South Africa, namely:
Marriages in community of property
Marriages out of community of property without accrual
Marriages out of community of property with accrual
Marriages in community of property
Marriage in community of property is undoubtedly the cheapest and most popular form of all the matrimonial regimes, although deeply flawed. No ANC is required, so if you marry without an antenuptial contract, you will by default be married in community of property. In this form of marriage, the spouses’ estates (what they own/assets and any debt/liabilities) are joined together and each has the right of disposal over the assets; they are equal concurrent managers of the joint estate. Each has an undivided or indivisible half share of the joint or communal estate.
Advantages of marriage in community of property
You don’t have to enter into a special contract before being able to get married.
When you are the financially weaker spouse, you get to share in the assets of your spouse.
Disadvantages of marriage in community of property
When you are the economically stronger spouse, you have to share your assets with your spouse.
You are jointly liable for each other’s debts. This is particularly problematic on insolvency.
The joint administration of the estate is rather complicated.
When a marriage starts to fail, it can become difficult to obtain joint consent.
One of the most devastating consequences of a marriage in community of property is that when one spouse becomes insolvent (cannot pay his/her debts), both spouses will be declared insolvent, because there is one communal estate. If there is a court order against either one of the spouses, the communal estate can be lost.
The consequences of divorce when married in community of property
Upon divorce, the assets of the joint estate as at the date of divorce will be divided equally between the parties, unless a spouse claims forfeiture and the court grants such a forfeiture order.
Marriages out of community of property
This matrimonial property regime involves an ANC (i.e. an agreement entered into before the marriage) where community of property and profit and loss are excluded. There is no joining of the spouses’ estates into one joint estate. Each spouse has his/her own separate estate, consisting of his/her premarital assets and debts, and all the assets and debts he/she acquires during the marriage. They each administer their own separate estates and have full and exclusive control over their own property. By marrying out of community of property, the spouses choose to keep their estates separate and whatever assets and liabilities they individually had before the date of marriage will remain part of their separate estates. The spouses can, however, agree to include the accrual between them so that both spouses will share equally in the growth during the marriage of each other’s separate estates.
Antenuptial contracts (ANC)
A marriage out of community of property is achieved by drawing up an ANC. The ANC will be the most important contract that a married couple will sign in their lifetime. Entered into before marriage, the purpose of the contract is to change some or all of the automatic financial consequences of marriage.
The ANC allows the husband and wife to tailor-make their very own matrimonial property regime. They can include any provisions they like in their ANC, as long as the provisions are not against the law, good morals or the nature of marriage. ANC’s are problematic to change as they dictate the financial and proprietary consequences of the couple’s future and can affect the rights of the couple’s creditors.
Couples may enter into one of two types of ANC:
an ANC that excludes community of property, community of profit and loss, and the accrual system; or
an ANC that excludes community of property and community of profit and loss, but includes the accrual system.
The ‘accrual’ is the extent to which the husband and wife have become richer by the end of the marriage, in other words, the amount by which the spouses’ joint wealth has increased over the period of the marriage. When married according to the accrual system, each spouse acquires a certain right to the other’s property on divorce. Neither system is superior to the other. The marital property regime chosen (i.e. with or without accrual) must suit the couple’s relationship dynamic and specific needs. Note that the ANC is a normal contract, so all the rules as to fraud, duress and mistake apply.
The consequences of divorce when married out of community of property without the accrual after 1 November 1984
In a marriage out of community of property without the accrual contracted after 1 November 1984, there can be no claim for a transfer of assets. The argument is that there are now three matrimonial property regimes to choose from, and if the parties willingly decided to marry out of community of property and without the accrual system, one of the parties cannot later request a redistribution of assets. In such a regime, upon divorce, each party will retain their separate estates, i.e. what they had upon marriage and including all growth to the separate estate that occurred during the marriage, minus any losses that may have been sustained. For example, if the husband came into the marriage with R10 000, he would leave with R10 000 + profits ˗ losses.
A spouse who contributed to the other spouse’s estate, whether in cash or otherwise, will have a difficult time proving that he/she is entitled to anything from their ex’s estate on divorce as contributions play no role if the parties are married without the accrual. If, for example, the wife stays home to raise the children and does not contribute financially towards the marriage and the other spouse works and accumulates assets, the wife may find herself with nothing and no claim to her husband’s assets.
Advantages of marriage out of community of property without the accrual
Each spouse keeps his/her own assets and is free to deal with his/her own estate as he/she likes.
Spouses are generally not liable for each other’s debts. Thus, if one spouse becomes insolvent, creditors cannot touch the assets of the other spouse.
The financially stronger spouse does not have to share his/her estate with the weaker spouse. This is subject to judicial discretion and forfeiture of benefits.
Disadvantages of marriage out of community of property without the accrual
The economically weaker spouse, traditionally the woman, does not get to share in the estate of the stronger spouse, even though she may have indirectly contributed to the estate by running the household and looking after the children. This is subject to judicial discretion and forfeiture of benefits.
An ANC has to be entered into in order to marry out of community of property. This costs money, and the parties must pay the fees of a notary and costs of registration.
Marriages out of community of property with the accrual
After 1984, anyone entering into an ANC that excludes community of property and community of profit and loss is automatically married under the accrual system. Spouses may, however, exclude the accrual system in their ANC, but if they do not do so expressly, the accrual applies. When the accrual is included, a spouse will be entitled to share in the growth of the two estates at divorce.
This is surely the most appropriate and ideal way to marry. All the assets that each party owns prior to the marriage can either be excluded or included in the accrual. If no assets are excluded in the ANC, the value of each party’s estate at the commencement of the marriage is deemed to be nil.
The consequences of divorce when married out of community of property with the accrual
Accrual is a way to ensure that both spouses in a marriage gain a fair share of the estate once the marriage comes to an end. The accrual system does not apply automatically to all marriages out of community of property. For the accrual system to apply, the ANC must be drafted in a certain way. The accrual system incorporates a calculation that is applied when the marriage is dissolved by divorce. The spouses will share the assets during the course of their marriage based on a particular calculation when the marriage is terminated.
The term ‘accrual’ is used to denote the net increase in value of a spouse’s estate since the date of marriage. In other words, what was yours before the marriage remains yours, and what you have earned during the marriage belongs to both of you. Because the right to share in accrual is exercisable only upon dissolution of the marriage, such a right is not transferable and cannot be attached by creditors during the subsistence of the marriage.
The following assets are not taken into account when determining the accrual (are not included in the net value of the estate):
Any asset excluded from the accrual system under the ANC, as well as any other asset that the spouse acquired by virtue of his/her possession or former possession of such asset.
Any inheritance, legacy, trust or donation received by a spouse during the marriage from any third party, as well as any other asset that the spouse has acquired by virtue of his/her possession or former possession of the inheritance, legacy, trust or donation, unless the spouses have agreed otherwise in their ANC or the testator/trix or donor has stipulated otherwise.
Any donation between the spouses.
Any amount that accrued to a spouse by way of damages (e.g. slander), other than damages for patrimonial loss or the proceeds of an insurance policy in respect of a dread disease.
Commencement values and accruals
Where parties wish to enter into an ANC with the accrual system, they must make sure that the commencement values of their respective estates (i.e. how much their estates are worth at the time of marriage) have been verified and accepted by both parties. It often happens in divorce matters that one party will allege that the other’s commencement value was inflated or completely inaccurate.
Upon the dissolution of the marriage by divorce, the net estate value (assets less liabilities less excluded assets and/or commencement values) of each estate is determined separately. The larger estate must then transfer half of the difference to the smaller estate. Putting it another way, the smaller estate must claim for an amount equal to half of the difference between the accruals of the respective estates. The right to share in the accrual only commences upon dissolution of the marriage by divorce.
The commencement value to be subtracted from the current value of the estate must be adjusted with the consumer price index (CPI) to make provision for any change in the value of money. To calculate the adjustment, go to http://www.statssa.gov.za and click on ‘Historical CPI’ and then on ‘Key indicators’. The factor by which the commencement value must be multiplied to get to the adapted value is calculated by dividing the value for the month of the dissolution of the marriage by the value for the month in which the parties were married.
Advantages of marriage out of community of property with the accrual
The spouses share the increase in their assets accumulated during the marriage and the economically weaker spouse benefits.
The spouses do not share their assets acquired before their marriage (but only if excluded in the ANC or included in the commencement values of the parties’ estates). The accrual system appeals to people who are already wealthy at the time of marriage.
During the course of the marriage, each spouse manages his/her estate at will. There is no complex joint or equal administration.
The spouses are not liable for each other’s debts. All that they share is their net assets. Thus, if one spouse becomes insolvent, the other spouse is protected against creditors.
Disadvantages of marriage out of community of property with the accrual
The economically stronger spouse has to share the profits that he/she made during the marriage.
One has to enter into an ANC in order for the accrual system to apply.
The calculation of accrual at the end of the marriage can be a bit complex.
Compiled by Bertus Preller
Family Law and Divorce Attorney and author of Everyone’s Guide to Divorce and Separation – Random House.