Marriage and Matrimonial Property

 

 

 

This is a complex situation with a few factors to consider.

How It Affects Your Home Loan Application

  • Individual Credit Scores In South Africa, you and your spouse have separate credit scores. Your spouse's bad credit will not directly affect your credit score.   
  • Joint Application When applying for a home loan, lenders will typically assess both your financial situations, including credit scores.
  • Your spouse's bad credit could make it more difficult to get a loan or result in less favorable terms (higher interest rates, lower loan amount).
  • Applying in Your Name Only Since you are married with an ANC with accrual, you can technically purchase a property in your name only. However, lenders will still consider your spouse's financial situation to some extent, as the property will form part of the joint estate upon divorce or death.

Consult with a lawyer specializing in property law and marital regimes to fully understand the implications of buying a property while married with an ANC with accrual.
 

The process of drafting and signing the antenuptial contract itself usually takes between one and five business days, depending on how quickly both parties can agree on the terms.  After signing, the contract needs to be registered at the Registrar of Deeds, which takes approximately eight business days.  Finally, it can take anywhere from one to three months to receive the fully registered copy of the antenuptial contract.

A "contract marriage" is essentially a marriage where the financial aspects are specifically defined and agreed upon before the marriage takes place. This is achieved through a legal agreement called an Antenuptial Contract (also known as a prenuptial agreement).  This contract outlines how assets and liabilities will be handled both during the marriage and in the event of divorce or death.

Both terms refer to the same type of agreement,  

Prenup Used in the US and other countries.
Antenuptial Contract The term used in South Africa.

The accrual system in South African matrimonial property law is designed to protect the spouse whose estate has grown less during the marriage.  It recognizes that one spouse may have contributed more financially than the other, or that one spouse's career or financial growth may have been limited due to family responsibilities, for example.  The accrual system allows the spouse with the smaller estate to claim a share in the growth of the larger estate upon divorce or death, ensuring a fairer division of the wealth accumulated during the marriage.  Essentially, it aims to equalize the financial gains made by each spouse during the marriage.

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Antenuptial contract with the accrual 

In South Africa, since 1984, an antenuptial contract (ANC) that excludes community of property and community of profit and loss automatically defaults to the accrual system, unless the couple specifically excludes it in their contract.  The accrual system, often considered the most equitable option, means that while spouses maintain separate estates during the marriage, they share in the growth of those estates upon divorce.  Assets owned before the marriage can be included or excluded from the accrual calculation.  If no assets are excluded, the initial value of each spouse's estate is considered to be zero for accrual purposes.

An antenuptial contract (ANC) with accrual offers a way to share the financial growth accumulated during marriage while maintaining separate estates. While it aims to be fair, it's essential to understand the potential drawbacks before choosing this option.  Carefully weigh these considerations against the benefits to ensure it aligns with your financial goals and expectations. An ANC with accrual can be a valuable tool, but it's vital to be fully aware of its complexities and potential drawbacks. Consult with one of our team here at Aucamp Attorneys specializing in family law to discuss your specific circumstances and determine if this type of contract is the best choice for your future.

Potential Drawbacks of the Accrual System

  • Complex Calculations Calculating the accrual upon divorce or death can be complicated. It requires valuing each spouse's estate and determining the increase in value during the marriage. This can be time-consuming, costly (especially with business valuations), and potentially contentious.
  • Potential for Unequal Outcomes While designed for fairness, accrual can sometimes lead to unintended imbalances. If one spouse's estate grows significantly (due to inheritance or investments), the other spouse may share in that growth even if their financial contribution was minimal.
  • Limited Protection for Pre-Marital Assets Accrual doesn't fully protect pre-marital assets. While you retain ownership, the increase in their value during the marriage may be shared, which might be undesirable if you want to preserve those assets.
  • Potential for Conflict Dividing the accrual can lead to disputes over asset valuation, what constitutes "growth," and the overall fairness of the division.  Disagreements about transparency or contributions can fuel conflict.
  • Tax Implications Dividing assets can trigger capital gains tax or other liabilities, adding financial burdens to an already challenging time.  Understanding these implications beforehand is crucial.
  • Not Always Suitable Accrual isn't right for every couple. Those seeking complete financial independence or those with significant wealth disparities might find it unsuitable.  It can create a financial interdependence some couples wish to avoid.
  • Uncertainty for Lower-Earning Spouse While accrual aims to protect the lower-earning spouse, a short marriage might result in minimal accrual, providing little benefit and potentially creating financial hardship, especially if career opportunities were sacrificed.

Tailoring Your Marriage Regime: Exclusions and Customisations

At Aucamp Attorneys, we understand that every marriage is unique.  That's why South African law, through the accrual system within an antenuptial contract, offers flexibility to tailor your matrimonial property regime to your specific circumstances.

Understanding the Accrual System and its Flexibility

The accrual system aims to ensure a fair division of wealth accumulated during the marriage. However, it also recognizes that certain assets should remain separate.  Your antenuptial contract is the key to defining these exclusions and customizing the accrual system to reflect your wishes.

Common Exclusions

Several asset types are commonly excluded from the accrual calculation

  • Inheritances, Legacies, Trusts, and Donations Assets received through inheritance, legacy, trust, or donation during the marriage are typically excluded, unless your antenuptial contract specifically states otherwise, or the donor/testator stipulated differently. This exclusion extends to assets acquired because of these inheritances or donations (e.g., if you sell inherited land and buy shares, the shares are also excluded).
  • Certain Damages Damages received for non-patrimonial loss (e.g., pain and suffering from slander) are generally excluded. However, damages for financial loss and proceeds from dread disease insurance policies are usually included.
  • Donations Between Spouses Gifts exchanged between spouses during the marriage are also typically excluded from the accrual calculation.
  • Assets Excluded in the Antenuptial Contract Beyond the standard exclusions, you and your spouse can specifically identify other assets you wish to keep separate.

Customising the Accrual System

Beyond exclusions, your antenuptial contract can modify how the accrual system operates.  Examples include

  • Varying Accrual Percentage You can agree on a percentage other than 50% for the sharing of accrual.
  • Accrual Commencement Date You can stipulate a waiting period before the accrual system takes effect. For example, you could agree that the accrual only begins after a certain number of years of marriage. This can be useful to protect each party’s initial assets should the marriage dissolve early on.
  • Inclusion of Pre-Marital Assets While typically excluded, you can choose to include specific pre-marital assets in the accrual calculation.
  • Conditions for Accrual Claim You can set specific conditions that must be met before an accrual claim can be made.

Practical Examples

  • Example 1 (Inheritance) A couple's antenuptial contract excludes inheritances. One spouse receives a substantial inheritance during the marriage, while the other builds a successful business. Upon divorce, the inheritance is not considered in the accrual calculation, ensuring it remains separate.
  • Example 2 (Delayed Accrual) A couple agrees that the accrual system will only apply after ten years of marriage. If they divorce before this milestone, neither spouse shares in the growth of the other's estate during the marriage.

Commencement Values and Accruals 

At Aucamp Attorneys, we guide you through every step of creating your antenuptial contract (ANC) with the accrual system, ensuring your financial interests are protected.  A crucial aspect of the accrual system involves understanding commencement values and how they impact the final division of assets.

Establishing Commencement Values 
When entering into an ANC with accrual, it's vital to accurately record the commencement value of each spouse's estate. This represents the net worth of your assets (assets minus liabilities) at the time of your marriage.  This value serves as the baseline for calculating the growth of your estate during the marriage.

Why Accurate Commencement Values Matter
Having clearly defined and agreed-upon commencement values is essential.  Disputes often arise during divorce proceedings regarding the accuracy of these values. One party might claim the other inflated their initial assets, leading to complex and costly legal battles.  At Aucamp Attorneys, we emphasize the importance of meticulous record-keeping and verification of these values to prevent future complications.

Adjusting Commencement Values for Inflation
Because the value of money changes over time, commencement values must be adjusted for inflation.  This is done using the Consumer Price Index (CPI) published by Statistics South Africa (www.statssa.gov.za).

To adjust the commencement value

  • Obtain CPI Data Find the CPI value for the month of your marriage and the CPI value for the month of your divorce.  You can find historical CPI data on the StatsSA website under "Historical CPI" and then "Key indicators."
  • Calculate the Adjustment Factor Divide the CPI value for the month of divorce by the CPI value for the month of marriage.
  • Adjust the Commencement Value Multiply the original commencement value by the adjustment factor. This adjusted value is used in the accrual calculation.

Example

Let's say you married in January 2010 and divorced in January 2020. Your commencement value was R100,000.  Using the CPI, you calculate an adjustment factor of 1.5. Your adjusted commencement value is R100,000 x 1.5 = R150,000. This R150,000 will then be deducted from the net value of your estate at the time of divorce to determine the accrual.

Navigating the intricacies of accrual calculations can be complex.  Aucamp Attorneys provides expert legal advice and assistance in drafting your ANC, ensuring your commencement values are accurately recorded and the accrual system works as intended. Contact us today for a consultation.

Calculating the Accrual Upon Divorce

Upon divorce, the accrual system aims to equalize the growth of each spouse's estate during the marriage.  Here's how it works

  • Determine Net Estate Values The net value of each estate is calculated separately. This involves totaling all assets, deducting liabilities, and further deducting any excluded assets and the adjusted commencement value.
  • Calculate the Accrual The accrual of each estate is the difference between its current net value and its adjusted commencement value.
  • Equalization The spouse with the larger accrual transfers half the difference between the two accruals to the spouse with the smaller accrual.  This effectively shares the growth accumulated during the marriage.

Accrual and Deceased Estates 

At Aucamp Attorneys, we understand that planning for the future includes considering the implications of death on your matrimonial property regime.  If you've chosen an antenuptial contract (ANC) with accrual, it's essential to understand how the accrual system interacts with deceased estates.

Accrual Claims and Deceased Estates 
The accrual system doesn't only apply to divorce; it also comes into play when one spouse passes away.  The accrual claim must be settled before any distribution of the deceased's estate according to their will or intestate succession (if no will exists).

How Accrual Works Upon Death

  • Claim Against the Deceased's Estate If the surviving spouse's accrual is less than the deceased spouse's accrual, the surviving spouse has a claim against the deceased's estate for half the difference. This ensures the surviving spouse receives their fair share of the growth accumulated during the marriage.
  • Claim by the Deceased's Estate Conversely, if the surviving spouse's accrual is greater than the deceased spouse's accrual, the deceased's estate has a claim against the surviving spouse for half the difference.

When Accrual Calculation is Unnecessary 
The accrual calculation becomes unnecessary if the surviving spouse is the sole heir or heiress to the deceased's estate, whether through a will or intestate succession. In this scenario, the entire estate, including any accrual, effectively passes to the surviving spouse.

The Importance of Legal Expertise 
Calculating accrual, especially in the context of a deceased estate, can be complex.  The process involves valuing assets, considering liabilities, adjusting commencement values for inflation, and applying the legal principles of accrual.  Whether dealing with divorce or a deceased estate, accurate calculation is paramount.