When it comes to marriage in South Africa, the accrual system determines what will happen to the assets of the spouses in the event of death or divorce. It is a legal framework created with an intention to create a proper balance and equality while distributing assets received by the spouses during the marriage. The accrual system applies to marriages choosing to be out of “community of property” matrimonial regime, through an antenuptial contract. This article will focus on what the accrual system is, its purpose, and how it works within the South African jurisdiction.
What is the accrual system?
The accrual system is applied in South Africa’s marital regimes and is defined by the Matrimonial Property Act no 84 of 1984. Distinct from the community property system, where all the properties and debts are shared in an equal fashion from the date of marriage, with the accrual system a spouse is entitled to keep his or her separate estates they had before the marriage, while sharing in the growth of assets only during the period of marriage.
The purpose of the accrual system
At its core, the accrual system seeks to strike a balance between protecting spouses, their individual property and the equitable distribution of wealth accumulated during the course of the marriage. Its primary objectives include:
Protecting individual property rights
The accrual system ensures that each spouse retains ownership of their pre-marital assets and any inheritance or gifts received during the marriage.
Promoting fairness
The accrual system aims to avoid circumstances where one spouse would be the sole beneficiary at the cost of the other in the event of a divorce or death, by keeping non-marital property separate from the marital estate.
Encouraging financial transparency
Partnerships that constitute the ‘accrual’ system will be more viable if the couples disclose their assets and liabilities in a frank manner prior to committing to a marriage. This will foster transparency and ensure that the parties involved have an understanding of each other’s positions.
How the accrual system works
If you are interested in the accrual system, it is important to understand how it works;
Antenuptial contract
Couples who wish to tie the knot in South Africa still have an option to pick the marital regime of their choice with an antenuptial contract. This regime describes whether they choose to marry in community of property subject to the accrual system or without community of property with accrual.
Calculation of accrual
The accrual is obtained by subtracting the net base values of a couple’s estate when the marriage starts from the net value when the marriage is dissolved by any means: divorce, or death. The net value consists of investments like land, equity and savings less loan payments and mortgage debt.
Equalization of accrual
After figuring out both the sum of the spouses, the spouse with the smaller accrual has a claim against the spouse with the larger accrual for half of the difference between the accruals. This ensures fairness since knowledge of the accumulated wealth during the union is required.
Exceptions
Some assets might not be considered in the accrual system calculation, for example inheritances, donations and assets which are explicitly delegated by the antenuptial contract. Further, debt dedicated and borne only to personal gains is not accounted for in the accrual calculation.
Legal proceedings
In the scenarios of divorce or deaths, there are existing laws that are used to bring about the accrual system. The courts might interfere to make sure that assets are divided evenly on a case-by-case basis and in compliance with the law.
Conclusion
The accrual system, in South Africa, plays a vital role in protecting the rights of individuals and, at the same time, it is a fair means of distributing the assets acquired during the marriage. It is therefore necessary to seek a legal counsel to gain knowledge regarding the nature of the accrual approach, and to create an antenuptial contract that will stand up in the court.