Signing an antenuptial contract before getting married does not mean you are anticipating divorce
Discussing an antenuptial contract might not be the easiest of conversations to have with a prospective spouse. However, it is important to be aware of the benefits of an antenuptial contract while you are happily married. Before we discuss the benefits of an antenuptial contract, let’s consider the different marital regimes couples can enter. In Community of Property The first and very popular regime is a marriage in community of property. It is still a popular regime as it is quite an easy regime to enter. If you do not have an antenuptial contract you are automatically married in community of property, which is the default marriage regime in South Africa. In this case, the common law creates communal property. The parties’ two separate estates will become a joint estate. Out of Community of Property Should the parties enter into an agreement in terms whereof community of property and profit and loss are excluded, they will be married out of community of property. The Matrimonial Property Act 88 of 1984 (hereafter referred to as “the Act”) introduced the accrual system which is applicable to marriages out of community of property. However, parties have the option to marry out of community of property with or without the accrual system. The two separate estates of the parties remain two separate estates for the duration of the marriage. What is the accrual system? Section 3 of the Act states that if the parties have agreed to a regime subject to the accrual system, at the dissolution of the marriage (by divorce or death of one or both spouses), the spouse, whose estate’s accrual is smaller than the other spouse, acquires a claim against the other spouse or their estate for an amount equal to 50% of the difference in the accrual of both estates. A very simplistic explanation of how the accrual system works is portrayed in an example with the following facts: A marries B out of community of property with the accrual system; Both parties started with a commencement value of R0; At the dissolution of the marriage (divorce or death) A’s estate increased in value to R100, while B’s estate is worth R200; Therefore, at the dissolution of the marriage A has a claim against B’s estate for an amount equal to 50% of the difference (R100); A can claim R50. When the parties enter into an antenuptial contract with the accrual system, they are free to exclude any asset from the accrual system. Additionally, section 5 of the Act determines that inheritances, legacies, and donations are excluded from accrual. What are the effects of the different regimes? Being married in community of property causes the two separate estates of the parties to form one joint estate. Therefore, both parties will share in the assets as well as the liabilities of the joint estate. Furthermore, spouses in community of property may need the consent, and in some cases the written consent, of the other spouse in order to execute certain actions in accordance with section 15 of the Act. If the parties marry out of community of property, their respective estates remain separate so that if, for example, one estate becomes insolvent, the other party’s estate is not affected by it. Should the parties marry out of community of property without the accrual system, the accrual of their respective estates will not be taken into account at the dissolution of the marriage. WRITTEN BY Darryl Gantana This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Can I claim interim relief pending my divorce suit?
Divorce can often be an extremely stressful and exasperating process, and even more so when one spouse enjoys complete financial stability and the other has to endure a dire financial position. Such cases clearly create a huge imbalance amongst parties to the divorce suit. South African law, however, provides relief for a party who may be prejudiced by this imbalance. A spouse who plans on filing for a divorce or is currently in the process of getting divorced, may bring an application to the High Court for interim relief in terms of Rule 43 (or in terms of Rule 58 if the application is brought in the Magistrate’s Court) for an order granting any of the following: Interim Maintenance (including child and spousal maintenance); interim custody of the children and/or interim access to the children; and/or a contribution towards the legal costs of the pending divorce proceedings. The purpose of a rule 43 application A rule 43 application provides a relatively speedy and inexpensive remedy when maintenance is sought while the divorce proceedings are pending. Divorce proceedings can often be an extremely lengthy process and can, in some instances, take years to finalise. It is for this reason that a rule 43 application is available to a party seeking interim relief. The procedure to obtain interim relief in terms of rule 43 An application for interim maintenance can be served on the other spouse prior to the issuing or service of a divorce summons, simultaneously with the divorce summons, or after a notice of intention to defend is received. The spouse seeking interim relief (the applicant) will have to file what is known as a ‘founding affidavit’ with the High Court. The founding affidavit must set out all the relevant facts related to the divorce and why the applicant is of the opinion that they are entitled to interim maintenance/relief from the other spouse (the respondent). The applicant will need certain prescribed documentation to file an application for interim maintenance, including: A notice in terms of rule 43, requesting the respondent to file an opposing affidavit within 10 days from receipt of the application; an affidavit accompanying the rule 43 notice; and an annexure setting out the applicant’s assets and expenses. It should be kept in mind that a rule 43 order is an interim order and thus cannot be appealed. The rule 43 order remains in force until the parties to divorce proceedings settle or until the divorce is finalized. It is, therefore, of extreme importance that all relevant documents needed for the application are in order and sound legal advice is sought and obtained before bringing the application before a court. We have a number of professionals in our family law department who can assist you with your application. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Do annuities form part of the estate during a divorce?
In the case of CM v EM it was held in the Supreme Court of Appeal of South Africa (“SCA”), case number 10861/2018, that: “The value of the Respondent’s right to future annuity payments in respect of Personal Portfolio Living Annuities (“the living annuities”) from Glacier Financial Solutions (Pty) Ltd, a member of the Sanlam Group, is an asset in his estate for purposes of calculating the accrual of his estate”. Prior to the judgement, a party to a divorce held no claim in regard to the other party’s living annuities. The court, in reaching its decision, referred to the case of De Kock v Jackson and another 1999 (4) SA 346, where it was concluded that there was no logical or legal reason why both the cash component and the accrued right to the pension should not form part of the community of property existing between the parties prior to the divorce. The court’s reasoning behind the decision was that the Respondent in this matter had a clear right to the investment returns yielded by his capital reinvestment with Sanlam, in the form of future annuity income which he draws from the agreement. The court, therefore, found that such annuity income is an asset which can be calculated for purposes of determining the accrual. The brief background to the matter was the following: The parties married in December 1999, out of community of property and subject to the accrual system as defined in the Matrimonial Property Act 88 of 1984. In July 2008, the Respondent used a portion of his pension benefit, which arose from his employment, to purchase a Personal Living Portfolio Living Annuity from Glacier Financial Solutions. In March 2017, he used the remainder of the proceeds of his pension benefit to make another purchase with Glacier. In all future divorce proceedings, in the absence of an agreement between the parties, an expert will have to be appointed to determine the value of a party’s right to receive future payments in respect of the living annuities. The SCA has not provided a guideline as to how the calculation should be done and this could lead to further litigation, as currently, an annuitant may elect to drawdown at any rate between 2.5 or 17.5 per cent per annum. Should there not be a history of contested percentages drawdown over a period of time, I am of the opinion that an average percentage of plus-minus 8 per cent will be used to determine the value of future payments. Reference List: CM v EM (1086/2018) [2020] ZASCA 48. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)