Understanding Accruals and Antenuptial Contracts in South Africa

Let’s Talk About Accruals and Their Importance in Your Marital Regime

Accruals are a crucial aspect of your marital or civil union regime if you and your partner plan to marry under an Antenuptial Contract (ANC) in South Africa. If your accrual and ANC are not structured correctly, the consequences can be significant for your family and finances.

Understanding Marital Regimes

Before diving into accruals, it’s essential to grasp the matrimonial systems in South Africa. These include:

1. In Community of Property: Both parties' estates merge into one. This means all assets and liabilities become shared.

   
   

2. Out of Community of Property Without Antenuptial Contract: Each party retains their own assets and liabilities. No merging occurs.

   
   

3. Out of Community of Property With Antenuptial Contract: Each party's estate is noted in the ANC. Certain exclusions, like donations and inheritances, can be specified. Upon dissolution, the growth of the estates is shared, but an accrual calculation is necessary.

   
   

What is an Accrual?

An accrual calculation occurs at the dissolution of a marriage or civil union, whether through divorce or death. This calculation is part of the antenuptial contract (ANC) signed before marriage or civil union.

• In Community of Property: All assets and debts are shared.

• Out of Community of Property with Accrual: Each spouse keeps their estate during the marriage. Upon dissolution, the growth of estates is compared. The spouse with the smaller accrual receives a share of the difference.

• Out of Community of Property without Accrual: No sharing occurs upon dissolution.

  
  

Civil unions are treated similarly under South African law. If you do not specify your property regime through an ANC, you are automatically considered married in community of property, which may not suit your circumstances.

The Importance of a Commencement Value

When drafting an ANC with accrual, each spouse must state the commencement value of their estate. This value reflects the assets at the date of marriage or civil union.

If no commencement value is noted:

• Your estate is assumed to have started at zero, even if you owned significant assets before marriage.

• This can inflate your accrual calculation at dissolution, leaving your spouse entitled to more than intended.

  
  

Legal Formalities for a Valid ANC Contract

For an antenuptial contract to be valid and enforceable in South Africa, strict formalities apply:

1. Section 86 of the Deeds Registries Act, 1937: If the ANC is not registered under Section 87, it has no legal force.

   
   

2. Attested by a Notary: The contract must be prepared and signed before a notary public.

   
   

3. Registered at the Deeds Office within 3 months: Failure to do so invalidates the contract.

   
   

4. Exception: Late registration is allowed only with a court order and consent.

   
   
   
   

Why is the Accrual System Important?

1. Fairness in Marriage or Union: It ensures both partners benefit from the growth of the union, even if one spouse contributes non-financially.

   
   

2. Estate Planning: The accrual affects how assets are distributed at death, impacting heirs and estate liquidity.

   
   

3. Insurance Planning: Life cover can provide the cash needed to settle accrual claims without selling assets. Accrual claims should be part of your estate planning and liquidity analyses, which also include executor fees, conveyancing, and transfer costs.

   
   

4. Divorce Settlements: Accrual directly impacts divorce negotiations and payouts.

   
   

By understanding these terms, you can make better decisions when structuring your policy and avoid unnecessary disputes later.

Common Misunderstandings About Accruals

Many couples only learn about the impact of accruals and antenuptial contracts during a divorce or after a death. This lack of knowledge can lead to disputes and financial strain.

Consulting an Expert

It's crucial to consult an attorney regarding your antenuptial contract. They can guide you through the complexities and ensure that your interests are protected.

At Wallstreet Financial Services, we help clients understand how their marital or civil union regime impacts their financial future. We also ensure your insurance and estate planning solutions are tailored to your unique needs.

Contact us today to review your portfolio, ANC implications, and estate plan. Getting this right now can protect your family for years to come.

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