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The Prenup (Ante-nuptial contract) explained

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The Prenup (Ante-nuptial contract) explained

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The prenup, aka the ante-nuptial contract is a contract signed between 2 people intending to get married. This contract sets out how the 2 individuals combine their assets upon getting married. The contract may also stipulate other conditions such as what happens upon the dissolution of marriage.

When is a prenup necessary?

In South Africa you can get married in a number of ways:

1. In community of property

2. Out of community of property with accrual

3. Out of community of property without accrual

The default form of marriage is in community of property. This applies to both civil and customary marriages. In other words, if you get married without putting a prenup or ante-nuptial contract in place then your marriage is classified as being in community of property. It’s possible to sign a similar contract that works like the prenup after the marriage, at quite a significant cost.

Marriage in community 

All property owned by the two parties becomes the property of both parties. This joint ownership includes all assets and all debt. All financial decisions have to be made with the consent of both parties. Under this arrangement – your property can be attached if your partner defaults on their debts.

Marriage out of community

Without accrual: This is the extreme opposite of marriage in community. In this case, what’s yours is yours and what’s mine is mine. Each spouse’s property remains separate from the other and each person is responsible for their own financial decisions. 

With accrual: This falls between the 2 extremes. Under this arrangement, all property gained during the marriage is shared equally between the two spouses. Specific assets can be excluded from the calculation of assets accrued during the marriage. An inheritance or business could be excluded from accrued assets. Each spouse remains free to make their own financial decisions. Claims against one spouse do not necessarily affect the other.

The benefits of an ante-nuptial contract

1. It’s practical

Being married out of community frees you and your spouse to make your own financial decisions – without needing the consent of the other. Major financial decisions should ideally be made in consultation with your spouse. However, needing to cosign every little transaction can become cumbersome.

2. It’s good for business

Being married in community of property is not ideal for professionals and business people. Any claims against you arising out of your work can affect your spouse as well.

3. You can get the best of both worlds

If you get married out of community but with accrual then you get the advantages of being in community (joint ownership of assets) without the practical disadvantages. You also avoid the seemingly cold situation created by being married out of community without accrual.

In conclusion

Choosing the right system for your marriage should be given significant thought and not something you just fall into. Each couple will have different circumstances and what works for one couple may not work for you. Seeking advice from legal professionals and people who’ve been married for a while may also be a good idea. 

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Thando

Thando is currently the Group Actuary at Clinix Health Group, having previously served as Actuary in Discovery Limited's R&D Lab. Thando loves tech, design, reading and is very passionate about the development of the African continent. Thando also runs Litmail, a tech startup in the e-communication space. All views expressed are Thando's own and neither reflect nor are influenced by the views of affiliated companies.

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