Antenuptial Contract with Accrual – Example Explained

In South Africa, when you marry, the way your assets and liabilities are managed can have long-term financial implications. One of the most important decisions couples make before they tie the knot is choosing the marital property regime that will govern their finances. For many couples, an antenuptial contract with accrual is the ideal choice. But what does this actually mean, and how does it work in practice?

What is an Antenuptial Contract with Accrual?

An antenuptial contract with accrual is a legal agreement between two parties before marriage that outlines how their assets will be treated during and after the marriage. Under this system, the couple’s estates remain separate, but any growth in the value of their estates during the marriage is shared equally.

In other words, while each spouse retains ownership of their individual property, any increase in wealth accrued over the course of the marriage is subject to equal division if the marriage ends in divorce or death.

The accrual system provides a fair way of sharing the growth in wealth accumulated during the marriage, while allowing each spouse to retain control over their pre-marital assets.

Antenuptial Contract with Accrual Example: How It Works

Let’s take a closer look at an example of how an antenuptial contract with accrual works in practice.

Scenario: Sarah and David

Sarah and David are getting married, and they’ve decided to enter into an antenuptial contract with accrual. They both have different financial situations, and they want to protect their individual assets while ensuring fairness if their marriage ends.

Before the marriage, Sarah has assets valued at R500,000, which include a small savings account, a car, and some personal items. David, on the other hand, has assets worth R1,500,000, including property, investments, and savings.

They both agree that, while their assets will remain separate during the marriage, any increase in the value of their individual estates during the marriage will be shared equally if the marriage ends.

Breakdown of the Example

Step 1: The Value of Their Estates at the Time of Marriage

  • Sarah’s estate at the time of marriage: R500,000
  • David’s estate at the time of marriage: R1,500,000

Step 2: The Growth in Their Estates During the Marriage After five years of marriage, both Sarah and David’s financial situations have changed significantly. Sarah has inherited money, and David’s business has expanded. Here’s how their estates look at the end of five years:

  • Sarah’s estate grows from R500,000 to R700,000.
  • David’s estate grows from R1,500,000 to R2,000,000.

Step 3: Calculating the Accrual The next step is to calculate the accrual, which is the increase in each party’s estate during the marriage.

  • Sarah’s increase in estate value: R700,000 – R500,000 = R200,000
  • David’s increase in estate value: R2,000,000 – R1,500,000 = R500,000

Step 4: Dividing the Accrual The total accrual of R700,000 (R200,000 from Sarah’s estate and R500,000 from David’s estate) is shared equally between them.

  • Sarah’s entitlement: Since Sarah’s estate increased by R200,000, she is entitled to half of the total accrual (R700,000 ÷ 2 = R350,000). This means Sarah will receive R150,000 from David’s estate to equalize the growth in their estates.

Key Takeaways from the Example

  1. Separate Estates: Although Sarah and David keep their estates separate during the marriage, the growth of their estates is shared equally. This prevents either spouse from being disadvantaged if one’s estate grows significantly during the marriage.
  2. Equal Sharing of Accrual: Even though Sarah had a smaller estate at the start of the marriage, she is entitled to an equal share of the increase in the estates of both parties. In this case, she will receive R150,000 from David’s estate.
  3. Protection of Pre-Marital Assets: Any assets they brought into the marriage remain theirs and are not subject to division. Only the growth in their estates during the marriage is shared.
  4. Fairness in Case of Divorce or Death: If Sarah and David divorce or one of them passes away, the accrual ensures that both parties benefit equally from the increase in wealth during the marriage. The one with the smaller estate at the start of the marriage may be entitled to a portion of the growth in the other’s estate.

Benefits of an Antenuptial Contract with Accrual

An antenuptial contract with accrual offers several important benefits for couples:

  1. Fairness in Wealth Division: The accrual system ensures that both parties share the wealth accumulated during the marriage, regardless of who was the primary earner or who had more assets at the start of the marriage.
  2. Protects Pre-Marital Assets: Each party retains ownership of their assets acquired before the marriage, so there’s no need to divide them in the event of divorce or death.
  3. Allows for Financial Independence: While the couple’s estates remain separate, the accrual system provides a fair mechanism for dividing the increase in wealth.
  4. Peace of Mind: By clearly outlining how assets and liabilities will be managed, an antenuptial contract with accrual can help reduce the potential for conflict in the future.

When Should You Consider an Antenuptial Contract with Accrual?

An antenuptial contract with accrual is ideal for couples who want to protect their pre-marital assets while also ensuring fairness if the marriage ends. This contract is often chosen by individuals who:

  • Want to maintain financial independence but also wish to share in the growth of wealth during the marriage.
  • Have significant assets or businesses they want to protect.
  • Want a system in place that ensures equality and fairness in the event of divorce.

Get Professional Advice on Your Antenuptial Contract

An antenuptial contract with accrual can provide the perfect balance between protecting your individual assets and sharing in the wealth that you and your spouse accumulate together. However, the intricacies of such contracts can be complex, and it’s important to ensure that your agreement is legally sound and tailored to your specific needs.

At PM Attorneys, our experienced team of legal professionals can help you draft a personalized antenuptial contract with accrual that suits your financial situation and protects your interests. Contact us today to schedule a consultation and ensure your financial future is secure.

PM Attorneys – Providing expert legal services for your peace of mind.