WHETHER TO EXCLUDE A HOUSE OR THE VALUE THEREOF FROM ACCRUAL IN AN ANTENUPTIAL CONTRACT
“Accrual” in terms of an antenuptial contract (“ANC”) is the growth of a spouse’s estate calculated by taking the net value on dissolution of the marriage and subtracting the net value at the commencement of the marriage.This amount is then adjusted in terms of the weighted average consumer price index (“CPI”) taken on commencement and termination of the marriage which gives the accrual of a spouse’s estate. If, after applying this calculation, there appears to be a negative amount the accrual will be deemed to be nil.
Prospective spouses may specifically exclude assets from their accrual when entering into an ANC. The result being that the excluded assets will not be taken into account when calculating the accrual on dissolution of the marriage.
Where spouses wish to exclude an asset, such as a house, from their accrual, they may decide either to exclude the market value of the house at the time of entering the ANC or the house itself.
In making this decision, the following implications must be considered:
- If the market value of the house is excluded from the accrual –
- The market value at the commencement of the marriage is not considered and the increased market value calculated by the weighted average of the CPI, will be excluded from the amount of the accrual on dissolution of the marriage.
- If, however, the market value of a spouse’s house escalates above that of the CPI (which could be caused by, for instance, improvements made to the house or an upturn in the property market) the amount, which is in excess of the CPI inflation,does fall within the accrual, and thus benefits the other spouse.
- If the house itself is excluded from the accrual –
- Any increase in market value will also be excluded, regardless of whether the market value escalates above that of the weighted average CPI.
- The owner may effectively diminish the amount of his/her own accrual, to the detriment of the other spouse, by making improvements to the house during the subsistence of the marriage.
Prospective spouses should, therefore, carefully consider these implications before excluding any assets from the accrual agreed in terms of the ANC.
This article has been written by Dylan Bradford, a Junior Associate in the Commercial Department at Garlicke & Bousfield Inc
For more information contact Dylan on telephone : +27 31 570 5439, email : firstname.lastname@example.org
NOTE: This information should not be regarded as legal advice and is merely provided for information purposes on various aspects of property law.