Love, Faith, Hope

The Legal side of marriage...

Why an Antenuptial Contract?

Antenuptial Contract is also known as a Prenuptial Contract or 'Prenup'. Is a contract entered into by two people, prior to their marriage, to stipulate the terms and conditions for the exclusion of community of property between them. This will ensure that one person’s creditors cannot hold the other person liable for repayment of debt – unlike when people marry without an Antenuptial Contract, i.e. ‘in community of property’. The Antenuptial Contract may also include almost any terms and conditions as long as they are not illegal, immoral or contrary to public policy. Most of these terms and conditions relate to the division of assets should the marriage be dissolved because of either death or divorce. During the marriage each spouse will retain his or her separate property and would have complete freedom to deal with that property as he or she chooses. This would not be the case if the parties were married without an Antenuptial Contract, i.e. ‘in community of property’. Should one of the parties ever be declared bankrupt, the other party’s property will be protected from the insolvent party’s creditors, subject to the provisions of Section 21 of the Insolvency Act. There are various reasons why couples should enter into an Antenuptial Contract prior to their marriage. The 7 most common reasons are:             An Antenuptial Contract can be drawn up to give you the same advantages of being married in community of property, without the disadvantage of being held liable for your spouse’s debt. .                  The one party do not want to be held liable for any debt that the other party might have incurred prior to the marriage; .                  The one party do not want to be held liable for any debt that the other party may incur during the marriage. Each party will be responsible for his or her own debt; .                  There might be certain assets at the time of the marriage that, for sentimental or financial reasons, one of the parties do not want to become part of a joint estate; .                  One party want to be able to enter into transactions with regards to his or her onw assets, without having to obtain the consent of the other party each time. With an Antenuptial Contract each party will retain control of his or her own property and will build up his or her own estate during the marriage; .                  They do not want to risk all their combined assets if one of them undertakes a business venture. They want to protect assets such as a house from creditors, particularly if one of the parties has his or her own business or income that vary, whilst the other party earns a stable income; .                  Each party wants to retain his or her individual financial identity independently from that of the other party. Since the implementation of the accrual system there remains absolutely no sound reason why couples should still get married without an Antenuptial Contract, i.e. 'in community of property'. This mostly occurs due to ignorance or haste, eventually resulting in an expensive and difficult High Court application to rectify the mistake. Antenuptial Contracts - The two options An Antenuptial Contract excludes community of property. This can only be achieved by entering into an Antenuptial Contract before you get married. There are two options:             marriage out of community of property with application of the accrual system .                               marriage out of community of property without application of the accrual system .                   If you conclude an Antenuptial Contract prior to your marriage, the accrual system will automatically apply under the Matrimonial Property Act of 1984, unless it is expressly excluded in your Antenuptial Contract. 'Accrual' means increase and by applying the accrual system, couples will share the assets that are built up during the marriage. The basic underlying philosophy in respect of the accrual system is that each party is entitled to take out the asset value that he or she brought into the marriage, whereafter they then share what they each have built up during the marriage. Take note however, that it is possible to draft the Antenuptial Contract in such a way that the parties share both their pre-marital and post-marital assets on a 50/50 basis, just as if they were married in community of property, but without incurring liability for each other’s debt. Marriage out of community of property WITHOUT application of the accrual system If you do not want the accrual system to apply, it must specifically be excluded in the Antenuptial Contract. The exclusion of the accrual system achieves a complete separation of the spouses’ assets - not only applicable to those assets brought into the marriage but also those acquired during the marriage. Each spouse will retain exclusive ownership of his or her own separate individual estate. There will thus be no sharing of assets or liabilities and on dissolution of the marriage, neither spouse will have any claim against the assets of the other, in other words, there is no sharing of profit or loss. On dissolution of the marriage, the Court will have no discretion whatsoever, to adjudicate the division on the basis of equity or fairness. Marriage out of community of property WITH application of the accrual system In most cases the accrual system is, perhaps, the fairest marriage system for the majority of couples. Before the introduction of the accrual system in 1984, if prospective spouses chose to be married out of community of property, there was no form of sharing between them of what was built up during the marriage. The accrual system was introduced to remedy this. It is applicable to all marriages out of community of property, unless the prospective spouses specifically exclude the accrual system in their contract. In terms of this regime, both spouses have separate estates during the subsistence of the marriage and do not share each other’s profits or losses during the marriage. This system has all the advantages of the protection afforded to marriages concluded out of community of property i.e. that assets of one spouse are secure from the creditors of the other spouse, but it incorporates the ethic of sharing, which is the basis of an in community of property marriage. In other words, while neither spouse will be liable for the other spouse’s debts, the parties will, however, share what they have acquired during the subsistence of the marriage. This sharing only occurs upon dissolution of the marriage, by either death or divorce. This regime of marriage allows for very imaginative and flexible estate planning. The 'accrual' is the extent to which the respective spouses have become richer by the end of the marriage, in other words, the amount by which the specific spouse’s nett wealth has increased over the period of the marriage. The claim will be limited to 50% of the value of which the one party’s estate exceeded the growth of the other’s estate. In order to simplify and facilitate the aforementioned calculations, the parties should declare the net value of their possessions at the beginning of the marriage in their Antenuptial Contract, in detail and as accurately as possible.

Colourful Days in May! by the Talented Alice:)