ANTENUPTIAL CONTRACTS: AN EARLY FORM OF ESTATE PLANNING

ANTENUPTIAL CONTRACTS: AN EARLY FORM OF ESTATE PLANNING

The decision whether a marriage should be in or out of community of property (and in the latter instance) whether the Accrual System must apply, is such an important choice that future spouses cannot really decide on a particular regime without being properly advised about the consequences of each.

During the existence of the marriage the contractual relationship between the spouses are of lesser importance (with exception of the conclusion of agreements with third parties). The proprietary regime however becomes of paramount importance upon the dissolution of marriage (death or divorce).

The Matrimonial Property Act 88 of 1984, contains three possibilities in terms whereof future spouses can conclude their marriage:

• Marriage In Community of Property

Where the proprietary consequences of a marriage are not excluded by an Antenuptial Contract, the marriage will automatically be deemed to be In Community of Property.

This means that the separate estates of the two spouses are merged into one as soon as the marriage is completed. All assets and liabilities are thereby merged into a joint estate in which both spouses (irrespective of the value of their financial contributions) hold an equal share (without the necessity of physical delivery or transfer thereof).

The biggest disadvantages of this type of marriage, are the following:

• Consent of the other spouse is required when concluding

contracts with 3^rd parties.

• Creditors of one spouse can execute their judgment against the joint estate of the parties.
• When insolvency proceedings are initiated against one spouse, it

also effects the other spouse (such process affects the joint estate of the parties).

• Marriage Out of Community of Property (Without Accrual)

Where the proprietary consequences of a marriage are excluded by an Antenuptial Contract, the marriage will be deemed to be out of community of property. As part of the contents of such agreement, the parties must decide whether the Accrual System shall apply (or not).

The main advantage of the marriage out of community of property is protection against insolvency and attachment of the assets of the solvent spouse (such protection equally applies to the accrual system).

Its greatest disadvantage however is that there is no automatic sharing in each others estate (upon death or divorce).

• Marriage Out of Community of Property (With Accrual)

The marriage out of community of property (subject to the Accrual System), has all the advantages of a marriage in community of property, but none of its disadvantages.

When the Accrual System applies, a calculation is made at the dissolution of the marriage. The spouse, whose estate shows no accrual or a smaller accrual, acquires a claim against the other spouse for an amount equal to half of the difference between the accrual of the respective estates of the spouses.

The accrual is therefore the difference between the Net Value (assets less liabilities) of the estate (of each party) at commencement of the marriage, and the Net Value (assets less liabilities) at death or divorce.

In addition, the parties have the option to exclude inheritances, legacies and donations from the accrual of their individual estates, when entering into the Antenuptial Agreement.

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