Antenuptial contract vs in community of property in South Africa

Marriage in community of property

In terms of South African law, if a couple does not sign an antenuptial contract before their marriage, they are automatically deemed to be married in community of property. So, all assets and liabilities are automatically shared and jointly owned by the couple.

The biggest risk that a couple faces when marrying in community of property is the potential for one of them to declare insolvency. Both spouses will be declared insolvent since they have a communal estate. The plus side to this regime, however, is that it grants the couple both legal and economic equality. During the marriage and upon divorce, both spouses are entitled to a half share in the joint estate and each one has equal powers of administration.

Marriage out of community of property with accrual

Antenuptial agreement with accrual means that the couple shares each other’s increases or decreases in their estates. Each spouse’s estate is valued at the time of marriage, and then again if the couple decides to divorce. The spouses then retain the assets they owned before the marriage but share in any increases made during the marriage.

The accrual system integrates a calculation that is applied when the marriage is ended by divorce. The spouses will share the assets during the course of their marriage based on a particular calculation if the marriage ends in divorce.

The couple shares the increase in their assets accumulated during the marriage and the economically weaker spouse benefits. However, they do not share each other’s debts, and thus a potential disadvantage is that the financially weaker spouse may have little credit worthiness during the subsistence of the marriage.

Marriage out of community without accrual

An antenuptial contract without accrual means that the couple’s finances are separate. Each partner’s estate remains entirely theirs before, during, and after the marriage. Each spouse’s bank account belongs solely to them, and debts incurred by either spouse are solely theirs. Thus, the financially and/or economically stronger spouse is not legally obligated to share his/her assets with the financially weaker spouse.

If one spouse has a notably larger amount of assets than the other, this holds no impact upon the other and remains exclusively theirs. The divorce process for an antenuptial contract without accrual is financially quicker and simpler. Any notable increases in wealth or debt by one spouse during the marriage does not affect the other should there be death or divorce.

The main disadvantage to an antenuptial agreement excluding accrual is that the financially and/or economically weaker spouse will suffer following divorce, having no share in their spouse’s assets.

If the couple decides not to sign a prenup and then change their mind too late, they risk having to sign a contract once they are married and may encounter complications and the expense of trying to execute and register a postnuptial contract.