THE ABC’S OF ANC’S: What Every Couple Should Know Before Saying “I Do”

Marriage is an exciting new adventure. There is a venue to choose, flowers to order, a guest list to negotiate and, of course, the all-important wedding cake.

But there is another decision that deserves a place on the wedding checklist: how will you and your future spouse structure your finances and assets during your marriage?

It may not be the most romantic conversation you have before the big day, but it is an important one.

In South Africa, marriage has significant legal and financial consequences. Your marriage regime can affect your assets, debts, future wealth and, importantly, what happens to your estate if the marriage ends through divorce or death. Try as you may one of these will eventually become relevant.

This is where an Antenuptial Contract (ANC) comes in.

So, what exactly is an ANC?

An ANC is a formal agreement entered into by two people before they get married. It sets out the matrimonial property regime that will apply to their marriage and can regulate how their respective assets, liabilities and future wealth will be treated.

Think of it as a financial roadmap for your marriage. Hopefully, you will never need it for a fight, but if you do, you will be very glad that it is there and we will be able to better assist you if that day comes.

Contrary to popular belief, entering into an ANC is not a sign that you expect your marriage to fail. It is simply an opportunity for both parties to understand the financial consequences of marriage and agree on the rules before saying “I do”.

What happens if we do not sign an ANC?

If you get married in South Africa without an ANC, you are generally married in community of property.

In simple terms, a joint estate is created. Subject to certain exceptions provided for by law, assets and liabilities form part of the joint estate, regardless of which spouse acquired the asset or incurred the debt.

This means that one spouse's financial decisions can have consequences for both spouses. It can also create complications where one spouse has a business, significant assets or other financial risks.

In other words, “what's mine is yours” can have a rather different meaning when debts enter the conversation.

What if we do sign an ANC?

An ANC allows a couple to marry out of community of property. There are two main options:

1.          Out of community of property with the accrual system

For many couples, this is the financial middle ground. Generally, each spouse retains a separate estate during the marriage. However, the accrual system provides for the sharing of the growth in the spouses' respective estates during the marriage, subject to the terms of the ANC.

In simple terms: you start with what you brought into the marriage and, when the marriage ends, the increase in your respective estates is taken into account and shared according to the accrual rules.

The ANC is particularly important here. The parties can agree that certain assets are excluded from the accrual, and the spouses' commencement values can be recorded.

These figures are important when calculating the accrual at the end of the marriage.

This regime can therefore provide a balance between financial independence and sharing in the wealth created during the marriage.

2.          Out of community of property without the accrual system

This regime provides for a greater degree of financial separation.

Generally, each spouse retains their own assets and remains responsible for their own debts and liabilities, subject to the applicable law and the terms of the ANC.

This arrangement may be particularly appropriate where:

·             one spouse has substantial assets before the marriage;

·             one spouse owns or operates a business and faces significant commercial risk;

·             the parties are entering into a second or subsequent marriage;

·             the parties have children from previous relationships; or

·             the parties have particular financial interests they wish to keep separate.

There is no “one size fits all” answer. What works for one couple may be completely unsuitable for another.

Getting the ANC right

An ANC is not simply a document that can be signed over coffee the week before the wedding.

For an ANC to be validly executed, it must be entered into before the marriage, be executed before a Notary Public, and comply with the applicable legal formalities. It must also be registered in the Deeds Office within the prescribed period, currently this is within three months after the date of its execution, or before the marriage, whichever occurs first.

Getting this wrong can have serious consequences, particularly where the problem only comes to light many years later when the marriage ends. And that is precisely the sort of legal surprise nobody wants at the end of a 20-year marriage.

What if we are already married?

Changing your matrimonial property regime after marriage is considerably more complicated. It may be possible, in limited situations, for spouses to change their matrimonial property system by obtaining a court order, subject to the requirements of the applicable legislation and the interests of creditors and other affected parties.

It is therefore far better to have the conversation before the wedding.

The bottom line

An ANC is not about planning for the end of a marriage. It is about planning for the marriage itself, and making sure that both spouses understand the financial rules that will apply to their lives together.

So, while you are choosing the venue, tasting the cake and deciding who sits where at the reception, make sure your matrimonial property regime is also on the checklist.

A little planning before the “I do” can save a lot of uncertainty later.

At VST Attorneys, our Notary Public can assist you with understanding the different matrimonial property regimes, determining which arrangement is appropriate for your circumstances, drafting and executing your ANC, and attending to its registration at the Deeds Office.