When entering into marriage, one of the most critical decisions a couple must make is how their assets and liabilities will be managed. In South Africa, the accrual system is a popular choice for couples who wish to marry out of community of property, yet still share the growth of their wealth over the course of the marriage. This system strikes a balance between maintaining financial independence and ensuring fairness in the division of assets in the event of a divorce or death.
At Engelsman Magabane Incorporated, your trusted legal firm in Kimberley, Northern Cape, we offer expert legal guidance to help couples navigate the accrual system. In this article, we’ll explore how the accrual system works, its benefits, and what you need to know when considering this option for your Antenuptial Agreement (ANC).
What is the Accrual System?
The accrual system is a legal mechanism that allows couples to maintain separate ownership of their estates during marriage while sharing in the growth of each other’s estates once the marriage dissolves, whether by death or divorce.
Unlike a marriage in community of property, where both parties share all assets and debts equally, the accrual system only involves the growth (or accrual) of the couple’s respective estates during the marriage. Each spouse keeps their individual estates separate, but at the end of the marriage, the spouse whose estate has grown less has a right to claim a portion of the difference.
How the Accrual System Works
Here’s how it works in practice:
- Pre-Marital Assets:
Before getting married, each spouse retains the assets they owned individually. These pre-marital assets are usually excluded from the accrual, meaning they will not be part of the estate growth calculation. - Accrual Calculation:
The accrual is calculated by subtracting the initial value of each spouse’s estate at the time of marriage from its value at the end of the marriage (either by death or divorce). The growth of each estate during the marriage is then compared. - Sharing the Growth:
The spouse whose estate grew less during the marriage is entitled to half the difference in the growth between the two estates. This ensures that both parties benefit fairly from the wealth accumulated during the marriage, regardless of who contributed more. - Exclusions:
Some assets may be specifically excluded from the accrual system by agreement, such as inheritances, donations, or specific assets the couple agrees should remain outside of the marital estate. These exclusions should be explicitly stated in the Antenuptial Agreement.
Example of the Accrual System in Practice
Let’s break down an example to illustrate how the accrual system functions:
- Spouse A’s Estate at the Start of Marriage: R500,000
- Spouse B’s Estate at the Start of Marriage: R300,000
At the end of the marriage, the estate values have changed as follows:
- Spouse A’s Estate at the End of Marriage: R1,200,000
- Spouse B’s Estate at the End of Marriage: R900,000
The growth in each estate is calculated as:
- Spouse A’s Growth: R1,200,000 – R500,000 = R700,000
- Spouse B’s Growth: R900,000 – R300,000 = R600,000
The difference in the accrual growth between the two estates is R100,000 (R700,000 – R600,000). In this case, Spouse B, whose estate grew less, is entitled to half the difference (R50,000) from Spouse A’s estate.
Benefits of the Accrual System
The accrual system provides a fair and flexible approach to handling marital property. Some of the key benefits include:
- Protection of Pre-Marital Assets:
Each spouse retains full control and ownership of their assets accumulated before the marriage, which are not subject to the accrual system unless otherwise agreed. - Fair Distribution of Wealth:
The accrual system ensures that both spouses benefit from the financial growth that occurs during the marriage, recognizing both financial and non-financial contributions (such as one spouse staying home to raise children while the other works). - Protection from Debt:
Since each spouse maintains a separate estate, neither is responsible for the debts incurred by the other spouse, except to the extent of the shared growth under the accrual system. - Simplicity in Divorce:
In the event of a divorce, the accrual system offers a structured and fair way to divide the estate, which can help avoid prolonged legal battles.
What Does the Law Say About the Accrual System?
The Matrimonial Property Act of 1984 governs the accrual system in South Africa. Under this Act, couples who wish to marry out of community of property with the accrual system must sign an Antenuptial Agreement before a Notary Public, and the agreement must be registered at the Deeds Office.
The Act ensures that:
- Each spouse’s estate is separate, but the growth during the marriage is shared.
- Pre-marital assets, inheritances, and donations received during the marriage can be excluded from the accrual system.
- Fair compensation is provided to the spouse with the smaller accrual at the end of the marriage.
Recent Case Law: The Importance of Proper Accrual Agreements
The courts have frequently had to weigh in on cases where the accrual system was disputed during divorce proceedings. A recent case, Thiele v Thiele (2020), highlighted the importance of clearly defining the terms of the accrual system in the Antenuptial Agreement.
In this case, the couple’s Antenuptial Agreement was poorly drafted, leading to confusion about what assets were excluded from the accrual calculation. The court ruled in favor of the spouse who sought to exclude certain assets from the accrual calculation, as these were clearly listed in the agreement. This case emphasizes the importance of carefully drafting an ANC and ensuring both parties fully understand its implications.
How Engelsman Magabane Incorporated Can Assist You
At Engelsman Magabane Incorporated, we specialize in matrimonial property law and are well-versed in the intricacies of the accrual system. We can help you draft an Antenuptial Agreement that reflects your financial goals, ensuring that your assets are protected while promoting fairness.
Our team will explain every aspect of the accrual system in detail, helping you make informed decisions about your financial future. Whether you are considering marriage or need to revise an existing ANC, our legal experts are here to provide tailored advice.
Conclusion: The Fairness of the Accrual System
The accrual system offers a balanced approach to managing marital property, allowing couples to keep their financial independence while sharing in the growth of their combined estates. By choosing an Antenuptial Agreement with the accrual system, you can protect your assets, ensure fairness, and avoid future legal disputes.
If you are planning to marry or need assistance with an existing Antenuptial Agreement, don’t hesitate to reach out to Engelsman Magabane Incorporated. We are committed to providing expert legal guidance to help you secure your financial future.
For professional advice on the accrual system and other matrimonial property matters, contact us today at https://engelsman.co.za/contact-us/.