What Does Antenuptial Contract With Accrual Mean

An antenuptial contract with accrual is a fair concept, but it is not always appropriate

Antenuptial contracts (ANCs) are a fairly standard part of modern wedding preparations. Prior to the Matrimonial Property Act of 1984, antenuptial contracts did exist, but were exceptional.

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The majority of marriages were in community of property (still the default marital regime in the absence of an ANC), and women were subject to their husband's marital power. The common marital estate, while nominally joint, was in fact completely under the husband's control. This afforded a woman, who was often financially dependent on her husband, a degree of economic security. A man could not just up and leave his wife with nothing (although, of course, that did happen).

Matrimonial Property Act of 1984 changes all that

Why did this change? And what does it mean for couples today, especially women? Where ANCs existed, they probably involved a marriage between two people of wealth, and arguably of power. If a man married a young woman of high social standing from a wealthy family, it is likely that her family would insist on the protection of her share of family assets she took to the marriage. This would prevent "gold-digging". In these cases the marriage would be out of community of property in its entirety. This meant that husband and wife were separate legal and contractual entities and there was no joint estate.

However, a disadvantage of this regime is that a woman whose contribution was labour, i.e. housekeeping and childrearing, had no share in any "profit" that might be made in the course of the marriage. So if the husband built up a successful business, and the wife played an important role in greasing social wheels, this supporting role was effectively disregarded on the dissolution of the marriage by divorce. She walked away with what she had brought into the marriage and nothing more. The husband, meanwhile, had the right to all the wealth he had built up, even if his wife was instrumental to his success.

Antenuptial contracts provide a fairer system

The legislators who crafted the Matrimonial Property Act of 1984 were progressive, and arguably even feminist. The Act sought to combine the advantages of the two marital regimes at the time (in community of property and out of community of property) and to eliminate their disadvantages. It did this in two ways. Firstly, in community of property was retained (still the default marital regime with no ANC) but revised to remove the marital power of the husband. It gave both spouses equal administrative rights over the joint estate. Secondly, it introduced the accrual system.

What is accrual in an antenuptial contract?

A marriage out of community of property with accrual allows the spouses to retain the assets they owned before the marriage but share in any gains made during the marriage. To put it in mathematical terms, the difference between the net increases in the respective estates during the marriage is divided equally between the two when the marriage is dissolved.

A sample calculation looks like this: One spouse owns a property worth R1m prior to marriage. Ten years later, the couple files for divorce. The property is now worth R1.5m.

The net increase (R500 000) is the accrual. This is then divided equally between the parties. The same calculation is applied to the entire estate.

Certain assets can be excluded from the accrual system, such as an inheritance or donations between the parties.

Marriage without accrual – any advantages?

You may wonder why anyone would want to enact a marriage without accrual? After all, it seems the fairest and most equitable way to acknowledge the mutual responsibility of care that marriage represents. At the same time it does not unduly compromise either's right to maintain ownership of their own assets. But there may be circumstances in whichwithout accrual is a more suitable system for the individuals involved. Firstly, liabilities are treated the same as gains in the accrual system, so each party's debt remains his or her responsibility if there is no accrual. If one spouse is a known risk-taker, the other may prefer not to be exposed to the financial liabilities that may arise. It may also help to protect one party's business, where they are a sole trader.

Secondly, not all newlyweds are young couples. Marriage and remarriage can happen later in life. The two individuals may have built up substantial estates and have children and grandchildren whose welfare they wish to protect. Particularly if both parties have similar means, they may prefer to keep their discrete assets entirely separate and "clean". This leaves them free to dispose of them as they wish on termination of the marriage, either by divorce or death. In this way promises that pre-date the new marriage can be kept to family members. And of course any express wishes between the spouses in terms of inheritance can be captured in a will.

Expert advice on antenuptial contracts

An ANC is not a complex contract but it pays to take legal advice. It's important to ensure you include everything of relevance and arrive at an accurate valuation. Simon Dippenaar and Associates have handled hundreds of antenuptial and postnuptial contracts and can ensure your ANC is robust and meets your needs. Contact us on 086 099 5146 or email sdippenaar@sdlaw.co.za.

What Does Antenuptial Contract With Accrual Mean