CONTRACTS IN CONTEMPLATION OF A MARRIAGE OR CIVIL UNION
Congratulations! You’re getting Married or entering into a Civil Union with your life-partner (husband, wife, spouse, or civil partner). Deciding the type of marriage or civil union which best suits you should be an important consideration when it comes to your wedding plans.
To understand exactly how the Law will apply to and affect you specifically, you will need to consult with your attorney. However, this article will help you to understand the general legal principles, thereby enabling you to ask better questions of your attorney and to understand fully your attorney’s advice.
In South Africa the contract which records the type of marriage or civil union is usually called an ANTENUPTIAL CONTRACT (or “ANC” for short). In the USA such a contract is often referred to as a “pre-nup” (short for PRENUPTIAL CONTRACT) and that terminology is often recognised by South Africans who have heard it used in the movies or read it in books.
This article will apply to your situation whether you intend entering into a marriage (which can be concluded between any two adult persons regardless of their respective sexual orientations) or a civil union (which can be concluded between any two adult persons regardless of their respective sexual orientations) – Antenuptial Contracts can apply to both.
First off it is important to know that generally Antenuptial Contracts are inexpensive. An Antenuptial Contract is likely to cost you less than the diamond Engagement Ring, less than the gold Wedding Bands, less than the suits and dresses, the venue, and the caterer, and less than the Honeymoon. It might in fact be the least expensive item in your budget. However, ironically, it can end up saving you an enormous amount of money. This will be discussed in more detail below.
There are only two types of marriages or civil unions in South Africa – either IN community of property, or OUT of community of property.
If you get married or enter into a civil union without signing an Antenuptial Contract, then your marriage or civil union will be IN community of property.
If you sign an Antenuptial Contract before you get married or enter into a civil union, then your marriage or civil union will be OUT of community of property.
It is very important to note that an Antenuptial Contract should be signed before you get married or enter into a civil union. If you do not, then it may be possible in certain circumstances to do so afterwards, but it will entail an Application to the High Court and that will cost you many tens of thousands of Rand.
LEGAL CONSEQUENCES – IN COMMUNITY OF PROPERTY
If your marriage or civil union is one IN community of property (i.e. you did not sign an Antenuptial Contract before you got married or entered into a civil union), then your and your life-partner’s estates will become one joint estate. This means that you will each own half of what the other owns. To be clear, if you own a car or a house or a business or a company or shares or unit trusts or have money in the bank or have any other assets at the time you enter into an IN community of property marriage or civil union, then at the very instant you marry or enter into that civil union, your life-partner will become a co-owner with you of half of all of these things. The same is true of anything you buy after you enter into an IN community of property marriage or civil union – your life-partner will become a co-owner of half of anything that you buy the very instant that you buy it. There are very few exceptions to this rule.
You might ask whether it is a good thing or a bad thing that you will each own half of what the other owns. The answer is that it can be a good thing, but it can also be a very bad thing. So bad in fact that your attorney would almost always recommend that you conclude an Antenuptial Contract so that your marriage or civil union is OUT of community of property. To understand better the types of situations where it may be a good thing or where it may be a bad thing, we suggest that you ask your attorney to explain both by way of examples.
LEGAL CONSEQUENCES – OUT OF COMMUNITY OF PROPERTY
If your marriage or civil union is one OUT of community of property (i.e. you did sign an Antenuptial Contract before you got married or entered into a civil union) then no joint estate is created by the marriage or civil union and each life-partner remains the sole owner of whatever they owned before the marriage or civil union occurred, and each will be and remain for all time the sole owner of that which each acquires after the marriage or civil union has taken place.
Again you might ask whether it is a good thing or a bad thing that no joint estate is created by a marriage or civil union that is OUT of community of property, and again the answer is that it can be a good thing, but it can also be a very bad thing. As mentioned before, we suggest that your attorney discuss with you the pros and cons of getting married or entering into a civil union in this form, to see how it impacts on your personal situation.
To sum up, both IN and OUT of community of property marriages and civil unions can have both good and bad results. So, how do you decide what option is best for you?
Our Law, fortunately, has one elegant solution to this problem – it is called the Accrual System.
THE ACCRUAL SYSTEM
The Accrual System tries to blend the best aspects of an IN community of property marriage or civil union with the best aspects of an OUT of community of property marriage or civil union. The single most obvious difference between this and a straight forward out of community of property marriage or civil union is that the life-partners share, in a reasonable and fair manner, in whatever it is they have acquired during the course of their marriage or civil union. The details of this can become quite complex and you will need to consult with your attorney to understand them fully, but in essence each life-partner remains the sole owner of that which they owned at the time of their marriage or civil union and then they share everything that each of them acquires during the course of the marriage or civil union – but they only share it when the marriage or civil union ends through the death of one of the life-partners or through divorce.
This form of the out of community of property marriage or civil union is probably the most popular form of the out of community marriage or civil union entered into these days. However, whether it is the correct choice for you depends on many different factors. After you have read this article you should consult with your attorney to ensure that you make the best possible choice.
When you get married or enter into a civil union there are a few other things you should do at the same time as considering an Antenuptial Contract:
- You should review your Last Will and Testament (you can also read an article about that on our website), discuss this document with your attorney, and amend it to cater for your new circumstances;
- You should take the opportunity to have a brief discussion with your attorney about trusts, business structures, tax, buying and selling property, financial risk management and such other services as your attorney may offer so that if circumstances arise that may require some of these services, you will know to contact your attorney at that time;
- You should reconsider your life insurance and medical aid policies and make sure that they are still adequate and appropriate, and reconsider the beneficiaries.
If you wish to make further enquiries on any issue raised in this article, please contact us.
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