Written by: Marlene Brits Attorneys
An Antenuptial Contract (ANC) is entered into by two people before their wedding date. This contract regulates the marital property regime the marriage will follow, better known as “out of community of property.”
In the absence of an ANC, the parties will automatically be married in community of property. For pure financial planning and reasons, it is never a good idea to marry in community of property, as the spouses’ estates are not separate anymore but seen as one joint estate. If your spouse is declared insolvent, you as a spouse will also be declared insolvent.
Antenuptial Contracts are significant as the contract dictates the financial and proprietary consequences of a couple’s future and can affect the rights of the couple’s creditors.
Couples can enter into two types of Antenuptial Contracts:
1) an ANC that excludes community of property, a community of profit and loss, and the accrual system (better known as out of the community without accrual); or
2) an ANC that excludes community of property and community of profit and loss, but includes the accrual system (better known as out of community with accrual).
The first type of ANC means all assets and liabilities of each spouse is excluded from the marriage entered into. This is a straight forward, no fuss ANC.
The second type of ANC which also excludes the community of property, a community of profit and loss but which includes the accrual system needs some explanation:
Each spouse retains ownership of their separate estates before the marriage but shares the accrued wealth acquired during the marriage upon divorce or death of a spouse.
The accrual system does not apply automatically to all ANC’s. When a couple chooses the accrual system, it must be drafted explicitly in the ANC for it to apply.
So what is accrual?
Accrual is the assets that you had before the marriage stays yours, but assets acquired during the marriage belongs to both spouses.
Each spouse has a commencement value they state in the ANC. The net increase in the value of each spouse’s estate since the date of marriage will be calculated and divided equally between the spouses upon divorce and death.