Marriage Out of Community of Property with the Inclusion of the Accrual in South Africa
After 1984, anyone entering into an ANC that excludes community of property and community of profit and loss is automatically married under the accrual system. Spouses may, however, exclude the accrual system in their ANC, but if they do not do so expressly, the accrual applies. When the accrual is included, a spouse will be entitled to share in the growth of the two estates at divorce.
This is surely the most appropriate and ideal way to marry. All the assets that each party owns prior to the marriage can either be excluded or included in the accrual. If no assets are excluded in the ANC, the value of each party’s estate at the commencement of the marriage is deemed to be nil.
The consequences of divorce when married out of community of property with the accrual
Accrual is a way to ensure that both spouses in a marriage gain a fair share of the estate once the marriage comes to an end. The accrual system does not apply automatically to all marriages out of community of property. For the accrual system to apply, the ANC must be drafted in a certain way. The accrual system incorporates a calculation that is applied when the marriage is dissolved by divorce. The spouses will share the assets during the course of their marriage based on a particular calculation when the marriage is terminated.
The term ‘accrual’ is used to denote the net increase in value of a spouse’s estate since the date of marriage. In other words, what was yours before the marriage remains yours, and what you have earned during the marriage belongs to both of you. Because the right to share in accrual is exercisable only upon dissolution of the marriage, such a right is not transferable and cannot be attached by creditors during the subsistence of the marriage.
The following assets are not taken into account when determining the accrual (are not included in the net value of the estate):
The mere fact that the assets of a trust are vested in the trustee does not per se exclude them from consideration when determining what must be taken into account when making a redistribution order or considering an accrual claim. Where a spouse has transferred assets in his/her name into a trust, in order for the court to take such assets into account, there must be evidence first that the party in question controlled the trust, and second that, but for the trust, he/she would have acquired and owned the assets in his/her own name.
Commencement values and accruals
Where parties wish to enter into an ANC with the accrual system, they must make sure that the commencement values of their respective estates (i.e. how much their estates are worth at the time of marriage) have been verified and accepted by both parties. It often happens in divorce matters that one party will allege that the other’s commencement value was inflated or completely inaccurate.
Upon the dissolution of the marriage by divorce, the net estate value (assets less liabilities less excluded assets and/or commencement values) of each estate is determined separately. The larger estate must then transfer half of the difference to the smaller estate. Putting it another way, the smaller estate must claim for an amount equal to half of the difference between the accruals of the respective estates. The right to share in the accrual only commences upon dissolution of the marriage by divorce.
The commencement value to be subtracted from the current value of the estate must be adjusted with the consumer price index (CPI) to make provision for any change in the value of money. To calculate the adjustment, go to www.statssa.gov.za and click on ‘Historical CPI’ and then on ‘Key indicators’. The factor by which the commencement value must be multiplied to get to the adapted value is calculated by dividing the value for the month of the dissolution of the marriage by the value for the month in which the parties were married.
For example:
Mr and Mrs Cruise were married in May 1990, and divorced in March 2012. In May 1990, Mr Cruise had a commencement value of R10 000. According to the CPI table:
May 1990 = 26.1
March 2012 = 120.9
Thus: 120.9 ÷ 26.1 = 4.6321
R10 000 x 4.6321 = R46 321 (adapted value)
This adapted commencement value will be deducted from Mr Cruise’s assets.
Determine the each estate’s accrual as follows:
The initial value of a spouse’s estate must be declared either in the ANC or a separate statement made not later than six months after the marriage, failing which the initial value will be deemed to be nil.
Advantages of marriage out of community of property with the accrual
Disadvantages of marriage out of community of property with the accrual
Conclusion
The Accrual system in South Africa facilitates a fair distribution of assets acquired during the marriage upon divorce, while preserving the assets each spouse had before marriage. This system, enacted through an Antenuptial Contract, requires meticulous record-keeping and might entail complex calculations at the marriage's end, especially adjusting commencement values with the Consumer Price Index. Despite these complexities, it stands as a favorable matrimonial property regime offering a blend of financial independence and shared growth, which can be particularly advantageous for financially disparate spouses, ensuring a level of protection against each other's debts and a fair share in the marital financial growth.
This is surely the most appropriate and ideal way to marry. All the assets that each party owns prior to the marriage can either be excluded or included in the accrual. If no assets are excluded in the ANC, the value of each party’s estate at the commencement of the marriage is deemed to be nil.
The consequences of divorce when married out of community of property with the accrual
Accrual is a way to ensure that both spouses in a marriage gain a fair share of the estate once the marriage comes to an end. The accrual system does not apply automatically to all marriages out of community of property. For the accrual system to apply, the ANC must be drafted in a certain way. The accrual system incorporates a calculation that is applied when the marriage is dissolved by divorce. The spouses will share the assets during the course of their marriage based on a particular calculation when the marriage is terminated.
The term ‘accrual’ is used to denote the net increase in value of a spouse’s estate since the date of marriage. In other words, what was yours before the marriage remains yours, and what you have earned during the marriage belongs to both of you. Because the right to share in accrual is exercisable only upon dissolution of the marriage, such a right is not transferable and cannot be attached by creditors during the subsistence of the marriage.
The following assets are not taken into account when determining the accrual (are not included in the net value of the estate):
- Any asset excluded from the accrual system under the ANC, as well as any other asset that the spouse acquired by virtue of his/her possession or former possession of such asset.
- Any inheritance, legacy, trust or donation received by a spouse during the marriage from any third party, as well as any other asset that the spouse has acquired by virtue of his/her possession or former possession of the inheritance, legacy, trust or donation, unless the spouses have agreed otherwise in their ANC or the testator/trix or donor has stipulated otherwise.
- Any donation between the spouses.
- Any amount that accrued to a spouse by way of damages (e.g. slander), other than damages for patrimonial loss or the proceeds of an insurance policy in respect of a dread disease.
The mere fact that the assets of a trust are vested in the trustee does not per se exclude them from consideration when determining what must be taken into account when making a redistribution order or considering an accrual claim. Where a spouse has transferred assets in his/her name into a trust, in order for the court to take such assets into account, there must be evidence first that the party in question controlled the trust, and second that, but for the trust, he/she would have acquired and owned the assets in his/her own name.
Commencement values and accruals
Where parties wish to enter into an ANC with the accrual system, they must make sure that the commencement values of their respective estates (i.e. how much their estates are worth at the time of marriage) have been verified and accepted by both parties. It often happens in divorce matters that one party will allege that the other’s commencement value was inflated or completely inaccurate.
Upon the dissolution of the marriage by divorce, the net estate value (assets less liabilities less excluded assets and/or commencement values) of each estate is determined separately. The larger estate must then transfer half of the difference to the smaller estate. Putting it another way, the smaller estate must claim for an amount equal to half of the difference between the accruals of the respective estates. The right to share in the accrual only commences upon dissolution of the marriage by divorce.
The commencement value to be subtracted from the current value of the estate must be adjusted with the consumer price index (CPI) to make provision for any change in the value of money. To calculate the adjustment, go to www.statssa.gov.za and click on ‘Historical CPI’ and then on ‘Key indicators’. The factor by which the commencement value must be multiplied to get to the adapted value is calculated by dividing the value for the month of the dissolution of the marriage by the value for the month in which the parties were married.
For example:
Mr and Mrs Cruise were married in May 1990, and divorced in March 2012. In May 1990, Mr Cruise had a commencement value of R10 000. According to the CPI table:
May 1990 = 26.1
March 2012 = 120.9
Thus: 120.9 ÷ 26.1 = 4.6321
R10 000 x 4.6321 = R46 321 (adapted value)
This adapted commencement value will be deducted from Mr Cruise’s assets.
Determine the each estate’s accrual as follows:
- Draft a list of all the assets, such as immovable property, furniture, vehicles, pension interest, annuities, policies, investments, bank accounts and interests such as shares and loan accounts in companies/partnerships/trusts or any other form of business, etc. obtained during the marriage at the present day values.
- Deduct the assets that were excluded in the ANC, as well as any other assets acquired by virtue of the possession, or former possession, of the excluded assets.
- Deduct inheritances, legacies or donations, as well as any other asset acquired by virtue of the possession, or former possession, of the inheritances, legacies or donations.
- Deduct any debts and liabilities.
- Deduct the commencement value, as stated in the ANC and adjusted by CPI.
- The net result will be the accrual in the estate.
The initial value of a spouse’s estate must be declared either in the ANC or a separate statement made not later than six months after the marriage, failing which the initial value will be deemed to be nil.
Advantages of marriage out of community of property with the accrual
- The spouses share the increase in their assets accumulated during the marriage and the economically weaker spouse benefits.
- The spouses do not share their assets acquired before their marriage (but only if excluded in the ANC or included in the commencement values of the parties’ estates). The accrual system appeals to people who are already wealthy at the time of marriage.
- During the course of the marriage, each spouse manages his/her estate at will. There is no complex joint or equal administration.
- The spouses are not liable for each other’s debts. All that they share is their net assets. Thus, if one spouse becomes insolvent, the other spouse is protected against creditors.
Disadvantages of marriage out of community of property with the accrual
- The economically stronger spouse has to share the profits that he/she made during the marriage.
- One has to enter into an ANC in order for the accrual system to apply.
- The calculation of accrual at the end of the marriage can be a bit complex.
Conclusion
The Accrual system in South Africa facilitates a fair distribution of assets acquired during the marriage upon divorce, while preserving the assets each spouse had before marriage. This system, enacted through an Antenuptial Contract, requires meticulous record-keeping and might entail complex calculations at the marriage's end, especially adjusting commencement values with the Consumer Price Index. Despite these complexities, it stands as a favorable matrimonial property regime offering a blend of financial independence and shared growth, which can be particularly advantageous for financially disparate spouses, ensuring a level of protection against each other's debts and a fair share in the marital financial growth.