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Are shares excluded from estate’s accrual?

Question:

I’m married out of community with the accrual system. I specifically excluded my share portfolio from my accrual in the antenuptial contract when we got married. Recently when reviewing my estate planning the question came up whether new shares that I acquired after we got married was also excluded for purposes of an accrual calculation.

What is the position here?

Answer:

To answer your question, one must first explain how the matrimonial property system of married out of community of property with the accrual system works.

When a couple choose to get married out of community of property with the application of the accrual system, they essentially agree to have separate estates for the duration of the marriage, but share in the accrual or growth of their separate estates.

When the marriage dissolves, the growth of each estate is calculated and the spouse with the larger accrual will have the growth of his or her estate that exceeds that of the other estate divided equally between the spouses. In other words, the spouse whose estate shows no accrual or a smaller accrual, acquires a claim against the other spouse for an amount equal to half of the difference between the accrual of the respective estates.

Parties who intend to marry with the accrual system can list their individual assets at the date of marriage, which they wish to exclude from the accrual. In terms of section 4(1)(b)(ii) of the Matrimonial Property Act 88 of 1984, assets which are excluded from the accrual system in terms of an antenuptial contract, will not be taken into account when accrual calculations are made.

Importantly though, a spouse can only exclude assets that he/she possessed at the start of the marriage. Assets that the spouse intends acquiring in the future may not be pre-emptively excluded. The purpose of the accrual system would be defeated if spouses could exclude assets they anticipated acquiring in the future. If this was allowed a spouse could exclude any asset that would cause their estate to grow, ensuring that their estate would have no accrual.

Each share held, is an asset of an individual estate. The company in which those shares exist, is, however, not an asset of the estate. Therefore, a clause in an antenuptial contract excluding “all shares held in company ABC” must be understood to exclude only the shares held at that time and not any additional shares acquired in future.

As with most legal rules there are exceptions. Section 4(1)(b)(ii) allows for the exclusion of assets acquired in the future as a result of the initial asset excluded. However, the spouse who claims they acquired the asset as a result of the initial asset they owned must prove such an allegation. This means that for shares acquired after marriage to be excluded from the accrual calculation, such a spouse must explicitly be able to prove that the additional shares were acquired as a direct result of the initial shares they owned prior to the marriage, for example an additional issue of shares to the spouse as a term of the initial preference shares owned. Should you, however, not be able to proof that the additional shares were acquired as a result of the initial shares excluded in the antenuptial contract, those shares will be included in the accrual calculation.

– Brady MacPherson, candidate attorney, Phatshoane Henney Attorneys

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