By Hannah Mower
Navigating the complexities of marriage and inheritance in South Africa requires a clear understanding of the legal frameworks in place. One of the most significant aspects is the choice of a matrimonial property regime, particularly the Antenuptial Contract (ANC) with the accrual system. This article will explore this system, its implications for inheritance, and the potential pitfalls to consider.
According to South African law, if a couple marries without an ANC, they are automatically married in community of property, meaning all assets and liabilities are shared equally between the parties. However, most couples opt for an ANC, which allows them to marry out of community of property. There are two main types of ANC: without accrual and with accrual. This article focuses on the latter.
Marriage Out of Community of Property with Accrual
The accrual system, introduced by the Matrimonial Property Act No. 88 of 1984, is automatically included in an ANC that excludes community of property and community of profit and loss, unless expressly excluded in the contract. The accrual system is designed to ensure a fair distribution of assets accumulated during the marriage upon divorce or death, while still protecting assets owned before the marriage.
The core principle of the accrual system is that each spouse’s estate is tracked separately. At the dissolution of the marriage (through divorce or death), the increase in value of each estate (the “accrual”) is calculated. The spouse with the smaller accrual has a claim against the other spouse for half the difference between the two accruals.
Inheritance and the Accrual System
The accrual system significantly impacts inheritance. Assets acquired during the marriage are subject to the accrual calculation. However, certain assets are excluded from the accrual, such as inheritances, legacies, and donations received by a spouse during the marriage, unless the ANC or the donor/testator specifies otherwise.
The implications for inheritance can be complex. For example, if one spouse inherits a substantial sum during the marriage, that inheritance is generally excluded from the accrual. However, if the inherited funds are used to purchase assets during the marriage, the value of those assets might be considered in the accrual calculation, depending on how the funds are managed and the specific terms of the ANC.
Potential Pitfalls and Considerations
Several factors can complicate the application of the accrual system in the context of inheritance:
Commencement Values:
The initial value of each spouse’s estate at the start of the marriage is crucial. These values must be declared in the ANC or within six months of the marriage. If not, the initial value is deemed to be nil. Inaccurate or disputed commencement values can lead to significant disputes upon divorce or death.
Trusts:
Assets held in trusts can complicate the accrual calculation. While the mere fact that assets are in a trust doesn’t automatically exclude them, the court may consider them if a spouse controlled the trust and would have owned the assets in their own name but for the trust.
Wills and Testamentary Dispositions:
The accrual calculation is determined before any testamentary dispositions (i.e., what is written in a will) are considered.
This means that the accrual can significantly impact the distribution of assets according to a will, potentially leading to unintended consequences.
Capital Gains Tax (CGT) and Estate Duty:
These taxes can further complicate inheritance. Careful planning is needed to minimize tax liabilities, which can be substantial, especially with the growth in value of assets like property and equities.
Practical Advice
Seek Legal Advice: It is essential to consult with an attorney specializing in family law and estate planning to draft an ANC that accurately reflects the couple’s wishes and protects their interests.
Accurate Record-Keeping:
Maintain detailed records of all assets, liabilities, and any excluded assets, such as inheritances and donations.
Regular Review:
Review the ANC and wills periodically, especially after significant life events like inheritances, changes in financial circumstances, or the birth of children.
Consider the Impact of Accrual on Wills:
When drafting a will, consider the impact of the accrual system on the distribution of assets.
In conclusion, the Antenuptial Contract with the accrual system offers a balanced approach to matrimonial property in South Africa, providing both financial independence and a mechanism for sharing in the growth of assets during the marriage.
However, it is a complex system, and careful planning, legal advice, and record-keeping are essential to ensure that inheritance wishes are fulfilled, and potential pitfalls are avoided.
