South African law recognises two forms of civil unions, marriages and civil partnerships, and for both forms of union it is prudent to consider an antenuptial contact. Civil unions include marriages and civil partnerships between same sex couples.
The matrimonial property regime that applies to a marriages or civil partnership will determine how spouses are able to effectively manage the assets owned by prior to and during the union and how assets will be divided and distributed upon the dissolution of the union by death of one of the spouses or by divorce.
It is essential that the most appropriate matrimonial property regime id determined by spouses prior to their union and that is incorporated in an antenuptial contact. The contact must be attested by a notary public and signed by both parties before the solemnisation of the union. If spouses do not enter into a antenuptial contact prior to the union, the matrimonial property regime that will apply to the union will automatically be in community of property.
There are three basic forms of antenuptial contact.
UNIONS IN COMMUNITY OF PROPERTY
The consequence of a union concluded in community of property is that all assets owned and liabilities owed by the spouses before and after the union is shared and included in the spouses’ joint estate. The spouses have shared equal powers in respect to the assets of the joint estate and in certain instances are restricted in dealing with the joint assets. During the union, all assets acquired fall into the joint estate, but all losses are shared too. This means that all the assets are vulnerable to the creditors of either party and that very little can be done to protect the joint estate from this exposure. This makes it very difficult for the spouses to adopt effective estate planning mechanisms to protect the assets from risk.
UNIONS OUT OF COMMUNITY OF PROPERTY WITH ACCRUAL (“THE ACCRUAL SYSTEM”)
Every union that is entered into out of community of property in term of an antenuptial contact is subjected to the accrual system, unless accrual sharing in excluded. Spouses in a union out of community of property do not share ownership of the assets that they own prior to or during the union and they remain separately responsible for the respectively liabilities. Their estates remain entirely separate and there is no sharing of profits or losses during the union. The incorporation of accrual system results in the equal sharing of value of assets acquired by the spouses during the union. The accrual in a spouse’s estate is determine by calculating the difference between the value of assets of each spouse at the commencement of the union and at the dissolution of the union, and the accrual in both estates is then shared equally. The accrual is only calculated upon the dissolution of the union. Certain assets can be excluded from the operation of the accrual system. This system has the advantage of sharing as contemplated in an in community of property union as well as the advantage of spouses being able to protect their estate from claims of the each other’s creditors. The accrual system is a flexible property regime and allows for effective estate planning.
OUT OF COMMUNITY OF PROPERTY’ EXCLUDING ACCRUAL SYSTEM
The third matrimonial property regime is one that excludes the sharing of assets and liabilities as well as profits and losses during and in dissolution of the union. The accrual system has to be expressly excluded in the antenuptial contact. The consequence of this regime is a complete separation of assets owned and liabilities and owed respectively by the parties. Although tis system has advantages in certain circumstances, it can result in inequitable consequences and can limit estate planning initiatives of the spouses. The court when granting a decree of divorce has no discretion to assist a spouse by effecting a sharing of assets.
The terms of an antenuptial contact can be flexible and can be drafted to accommodate th specific needs of the spouses, subjecting to the terms not being contrary to public policy. This is a brief synopsis of our law pertaining to antenuptial contacts and intended spouses are well advised to seek legal advice regarding the matrimonial property regime that best suits their circumstances.