Before you say ‘I do’, you and your fiancé need to consider entering into an Ante-nuptial Agreement (ANA). An ANA is a formal contract that governs your marital property regime during the course of your marriage and, more importantly, determines how assets will be divided when the marriage relationship dissolves.
A marriage relationship will dissolve either through divorce or upon the death of a spouse. At both junctions, the effect of your chosen matrimonial regime will come into play. Assets will be divided in terms of the ANA as on the date of divorce or the date of death.
There are three property regimes you can choose to govern your matrimonial property, being:
- In Community of Property
- Out of Community of Property
- Out of Community of Property, with the Inclusion of the Accrual System
In Community of Property
In South Africa (RSA), being married in community of property is the default regime if an ante-nuptial agreement was not signed and notarized prior to the marriage date.
Getting married in community of property has some serious financial and legal implications. You and your spouse automatically become joint owners and joint liability holders of all assets and liabilities, even if same was obtained prior to the marriage. The estates of two spouses now effectively become a communal estate. Written permission from both spouses will be required during the course of the marriage to obtain new assets, which will be jointly owned, or to incur any further liabilities.
A further consequence of being married in community of property is that should one or both spouses become insolvent or become placed under debt review, the communal estate in its entirety will be declared insolvent or placed under debt review, meaning both spouses are declared insolvent or placed under debt review.
Upon the death of a spouse, the entire communal estate will be frozen pending the winding up of the joint estate, prior to executing the terms of the Will of the deceased spouse.
Out of Community of Property (Exclusion of Accrual)
This is the most simplistic regime concerning the governing of matrimonial property. Simply put, both spouses will retain full control and ownership of all assets and liabilities obtained either before the marriage and during the course of the marriage, and upon the dissolution of the marriage relationship.
There will never be any division or redistribution of any assets upon dissolution of the marriage relationship, and in the case of insolvency, only the estate of the insolvent spouse will be affected. A recent judgment, however, has now made it possible to claim for the redistribution of assets during divorce proceedings in certain circumstances.
Upon death of a spouse, only the deceased spouse’s estate is frozen and subject to winding up.
Out of Community of Property, with the Inclusion of the Accrual
This is a variation to being married out of community of property, with all its benefits as explained above, but with the added feature that assets are divided/redistributed in terms of the contract at the dissolution of the marriage relationship.
“Accrual” is the fancy legal term for growth. The general principle is that the net growth of each estate must be calculated as on date of divorce/death, by subtracting the beginning value from the end value. The net growth amount is the value after the liabilities are subtracted from the assets. The estate that showed the higher growth needs to pay the smaller estate an amount equal to half of the difference in the value of the two estates.
The agreement needs to be signed before a notary and two witnesses prior to getting married. Although it is possible to enter into a post-nuptial agreement, this cannot be guaranteed. It will require a substantive court application and can only be done with the Court’s permission. This is due to the fact that your chosen matrimonial property regime has a direct impact on any creditors of your/communal estate.
In short, an ante-nuptial agreement protects your spouse’s financial well-being and forms part of estate planning. The conclusion of an ante-nuptial agreement should go hand in hand with updating your Will as well.
Please note: The information provided above is intended only to offer a basic overview of the topic and does not constitute comprehensive legal advice or a full discussion of all relevant procedures. For more detailed information or personalized advice specific to your situation, please contact us to schedule a consultation.