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The Ante-nuptial Contract

ante-nuptial contract signature

An ante-nuptial contract (commonly known as an “ANC” or “pre-nup”) is perhaps one of the most important documents a person will ever sign. Unfortunately, it is also one of the most misunderstood.

Essentially, an ante-nuptial contract is the agreement that two persons intending to marry can sign before their marriage, which prescribes what will happen to the assets and liabilities of each person upon death or divorce.

Parties seeking to be married should give serious consideration to the marital property regime they want to apply to their marriage. If they choose to be married out of community of property, then concluding an ante-nuptial contract would be the result of that process.

There are three marital property regimes in South Africa:

1. In community of property

This is the default regime in South Africa. If a person does not conclude an ante-nuptial contract before their marriage, they will be married under this regime. What it means is that the parties to the marriage will see all of their assets and liabilities (whether they are acquired before or after marriage) lumped together in one joint estate.

While it does mean that parties share in everything, it also comes with considerable risks. Consider that one party may be liable to a creditor – that creditor does not need to distinguish between the party who owes the funds, and the spouse of that party. The creditor can proceed to recover the debt against the whole of the joint estate.

Because of the risks of this regime, and as a general rule, we recommend that our clients do not marry in community of property, and rather conclude an ante-nuptial contract.

2. Out of community of property (without the accrual system)

This marital property regime can best be summarised by the phrase “what’s mine is mine”. Assets and liabilities are not shared at all (whether they arise before or after marriage).

The primary advantages of this regime are:

  • Simplicity – the parties each have complete contractual independence; and
  • Separate Estates – the creditors of a party can only pursue that party, and cannot seek to recover a debt from the spouse. In this way, the parties “protect” one another from the liabilities of each other.

An ante-nuptial contract which gives effect to this regime is a relatively straightforward matter.

Whilst popularity is not a determining factor, this regime is more popular with parties who have established estates. The next option (below) is far more common, especially so with parties who are marrying for their first time or where they do not have established estate.

3. Out of community of property (with the accrual system)

This regime is by far the most popular choice by parties marrying in South Africa. It is, in essence, the middle-ground between the two regimes described above.

While parties are still afforded the protection from one another’s creditors (that is, they retain separate estates), the accrual system is of relevance and it provides that whatever the parties earn during the marriage must be shared equally between them. In this way, the sense of sharing is maintained during marriage (because whatever is earned is shared 50:50), while the parties still have the benefit of not needing to worry about whether the creditor of one might pursue the other.

An example of this regime working well is where a husband may be at work all day and a wife may be at home, caring for the children. Upon death/divorce, the wife’s estate will share with the husband’s estate the amount earned by the husband during the marriage.

Within this regime, parties can also determine which assets (or the values of assets) they wish to exclude from the accrual system, that is, which assets they own before marriage that they do not wish to be included in the accrual. We have found that parties often require considerable advice on this issue.

 

Ultimately, determining what regime should apply is one of the most important decisions a person will make, and we recommend that parties work through various examples and scenarios to determine which regime is best suited for them. Discussing this with your attorney at a consultation is of course the best way to determine which regime is most suitable.

Finally, the issue of costs – the costs of drawing up an ante-nuptial contract vary from law firm to law firm. Given that parties seeking to marry are usually working off of a budget, we have determined a set fee which we charge our clients for an ante-nuptial contract (which includes the time spent at consultations, drafting time, disbursements and VAT) which we consider to be of excellent value for the service offered and which does not come with any hidden costs.

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