When entering into marriage, one of the most significant decisions couples must make relates to the legal consequences of their marriage on their property and finances. In South Africa, couples have the option of getting married in community of property or out of community of property. One popular variation of the latter is the "Out of Community of Property with the Accrual System." This system strikes a balance between individual asset control and fair sharing of wealth accumulated during the marriage. Let's delve into what this marital regime means and how it works.
What Does "Out of Community of Property with Accrual" Mean?
In simple terms, when a couple marries out of community of property with accrual, each spouse retains control over the assets they owned before the marriage. This means that neither party can claim ownership or rights to the other’s pre-marital assets. Each spouse manages their own estate, keeping debts and assets separate from their partner during the marriage.
However, the accrual system introduces an element of fairness to this arrangement. While each spouse’s pre-marital estate remains their own, any growth or accrual in wealth during the marriage (with some exceptions) is shared equally between both spouses when the marriage ends, either by divorce or death.
The Key Components of This System
1. Separate Estates: Each spouse has their own estate, which consists of the assets and liabilities they bring into the marriage, and they manage these independently. There is no automatic joint estate between them.
2. Accrual Sharing: The accrual refers to the growth in the value of each spouse’s estate during the marriage. Upon dissolution of the marriage, the accrual is calculated, and the spouse with the smaller accrual is entitled to claim half the difference between their accrual and that of the wealthier spouse. This ensures that any increase in wealth during the marriage is shared.
3. Starting Values and Exclusions: Before the marriage, each spouse can declare the value of their estate. This starting value, often recorded in the antenuptial contract, ensures that only the wealth accumulated during the marriage is considered for accrual sharing. Certain assets, such as inheritances or gifts, can also be excluded from the accrual calculation.
4. Ending the Marriage: When a marriage ends through divorce or death, the accrual system comes into effect. If one spouse’s estate has grown significantly more than the other’s, the less wealthy spouse is entitled to half of the difference in growth between the two estates. For example, if one spouse’s estate increased by R500,000 during the marriage and the other’s increased by R200,000, the difference (R300,000) is shared, giving the spouse with the smaller estate an entitlement of R150,000.
Advantages of the Accrual System
• Fairness: One of the major advantages of the accrual system is that it promotes fairness by ensuring that both spouses share in the wealth accumulated during the marriage. This is particularly important in marriages where one spouse might earn significantly more than the other or where one spouse takes on a greater domestic role, contributing indirectly to the family’s wealth.
• Financial Independence: Unlike marriage in community of property, where all assets and liabilities are pooled together, this system allows both partners to maintain financial independence throughout the marriage. Each spouse is responsible for their own debts and assets during the marriage, reducing financial conflict.
• Flexibility: Couples can agree to exclude specific assets from the accrual calculation, such as family heirlooms, businesses, or property owned before the marriage. This flexibility allows couples to tailor the arrangement to their specific circumstances.
Disadvantages of the Accrual System
• Complexity: The accrual system requires careful record-keeping and valuation of assets at the start of the marriage and at the end. In the event of a divorce or the death of one spouse, it can be time-consuming and costly to calculate each spouse’s entitlement, especially if the values of the estates are disputed.
• Potential for Disputes: If a couple does not maintain clear records of their assets or if the values change significantly, disputes can arise. For example, determining the value of a family business or investments can lead to disagreements.
• Not Automatic: Couples must specifically choose the accrual system by signing an antenuptial contract before they marry. Without this contract, South African law will automatically place them in a marriage in community of property, where all assets and liabilities are shared equally from the start.
How to Set Up an Out of Community of Property with Accrual Marriage
To marry out of community of property with the accrual system, the couple must sign an antenuptial contract before the marriage. This contract is drawn up by a notary and must be registered with the Deeds Office within three months of being signed. The contract will outline how the accrual system applies and include any exclusions or special terms that the couple agrees upon.
The antenuptial contract not only ensures that the couple is married out of community of property but also provides legal clarity on how the accrual system will be applied in the future.
Conclusion
Marriage out of community of property with the accrual system is a popular choice for couples who value both financial independence and fairness in sharing the wealth accumulated during their marriage. It provides a balanced approach, ensuring that both partners benefit from the marriage’s financial success while protecting their pre-marital assets. However, it does require careful planning, clear communication, and sometimes complex financial calculations. For couples considering this marital regime, it's important to seek professional advice to ensure that both parties understand the implications and how to protect their individual interests.
By understanding the workings of the accrual system and drafting a well-structured antenuptial contract, couples can create a fair and balanced foundation for their financial future together.
Summary of the Accrual System
The accrual system is a financial arrangement within a marriage contract where each spouse retains ownership of the assets they brought into the marriage, while sharing the wealth accumulated during the marriage. Here’s how it works:
1. Separate Estates: Each spouse has their own estate and maintains control over their pre-marital assets and debts.
2. Accrual Sharing: Upon divorce or death, the difference in growth between the two estates is calculated. The spouse with the smaller accrual (growth in wealth) is entitled to half the difference in accrual between the two estates.
3. Exclusions: Pre-marital assets, inheritances, and gifts can be excluded from the accrual calculation.
4. Ending the Marriage: Upon dissolution, the spouse whose estate grew less during the marriage can claim half of the difference in accrual, ensuring fair sharing of wealth.
The system balances financial independence during marriage with fair distribution of shared wealth when the marriage ends.
The system balances financial independence during marriage with fair distribution of shared wealth when the marriage ends.