The In’s and Out’s of an Antenuptial Contract

20 May 2013 773

Susan and James are on the verge of getting married. For both it is their second marriage and both have learnt the importance of reaching agreement as to the regulation of their matrimonial property at the start of the marriage. Accordingly, they have decided to marry out of community of property and to regulate their marriage and individual estates through an antenuptial contract. However, they are still concerned about how to protect existing assets and the inheritances of their children from their previous marriages. Can all of this be regulated in their antenuptial agreement?

For Susan and James to address their concerns, it is important that when they meet with their notary public in order to agree the terms of their antenuptial contract, they fully discuss their concerns, types of assets and intended treatment of these assets at the dissolution of the marriage (by death or divorce).

The first item on their agenda should be to inform the notary public that they wish to marry out of community. To marry out of community of property in South Africa, necessitates the conclusion of an antenuptial contract which is also registered at the Deeds Office. The accrual system will apply to their marriage unless Susan and James expressly exclude the accrual system in the antenuptial contract.

Susan and James want the accrual system to apply to their marriage so that they share in the growth of each other’s estate accumulated during the marriage at the dissolution of the marriage, but wish to have specific assets not included in the accrual.

Important for Susan and James to understand is that the following list of assets will automatically in terms of our law be excluded from the accrual of their estates:

  • Any inheritance, legacy or donations accrued during their marriage.
  • Damages for eg. for a claim for injury, but not damages for loss of property.
  • The net value of the parties’ estates at the commencement of the marriage (established and recorded in the antenuptial contract).
  • Assets specifically excluded from accrual in the antenuptial agreement.

Assets which may be excluded from the accrual by the parties include any property promised to a third party (eg. an inheritance, bequest etc), shares in a family business and the income generated by that business, and any interest in a family trust where one of the parties is a beneficiary. However, for an asset to be excluded from the accrual, it must be properly described and it should be stated clearly whether the entire asset is excluded or just a specific value attached to the asset.

It can be noted in general that it remains in the discretion of the marrying couple to include any type of asset in the accrual of their estates. They need only ensure that such is specifically regulated by the antenuptial contract. Accordingly, they could even include items such as an inheritance, legacy or donation in their accrual, which would otherwise be excluded.

Susan and James can also consider inserting a clause requiring one or both of the spouses to take out a life insurance policy for the benefit of the surviving spouse or children. If the policyholder then passes away the beneficiary can accept the benefit and the proceeds of the policy will not form part of the estate of the deceased. No estate duty will then be payable on such proceeds as the proceeds of the policy will be excluded from deceased’s estate and not used in the calculation of the accrual.

An antenuptial contract can also contain testamentary and inheritance provisions, but care should be taken to discuss whether it would not be more appropriate to have a separate will drafted for the couple. A separate will can easily be amended by the parties themselves during the course of the marriage rather than having to apply to court for an amendment to their antenuptial contract. That said, parties may wish to at the outset in their antenuptial contract deal with certain of their assets at death and even regulate the creation of a trust. However where a trust is created to hide accrual in an estate, our courts may find that the trust is a sham and still take account of the assets of the trust when calculating the accrual.

The usual rules of the interpretation of contracts are applicable to antenuptial contracts and additional clauses may be added to the contract as with any contract, provided the intent of the parties is not against public policy. That said, antenuptial contracts can have substantial consequences for parties and their families and great care should be taken to properly discuss the required terms and consequences of your antenuptial contract with your notary public.

Tags: Family, Marriage, Trust, Will