Antenuptial Contracts: The Full Lowdown

What are Antenuptial Contracts?

Antenuptial contract is a written contract that two people enter into prior to marriage and apply to the assets and property that each party holds separately and assets and property that may be acquired during the marriage. Contracts entered into before the marriage allows the couple to decide how they would like to divide the property and assets in the event of a divorce or the ending of their relationship such as through one partner’s death.
In other words, an antinuptial contract can specify how acquired property and assets will be divided if the marriage terminates by death or dissolution. If the parties do not agree on the determination of these issues prior to the marriage and the marriage terminates, the court will determine how separate assets and property will be divided based on the law in accordance with equitable distribution or community property rules as they apply in the particular state in which the couple resides , or resided when the marriage was terminated.
The difference between an antinuptial contract and other marital agreements such as a postnuptial agreement (also called a separation agreement) is that an antinuptial agreement is entered into before the marriage takes place. Agreements such as prenuptial and postnuptial generally relate to domestic relations issues including the separation of property, alimony/spousal support, custody, child support, and visitation rights.
In defining an antinuptial contract, one commentator has termed it as "a formal agreement, consummated prior to the marriage by two persons about to be married, which delineates their respective rights and duties so that in the event of their separation, divorce or death, there will be no misunderstandings, no disputes, and no litigation regarding the finances or property which belong to them.

Advantages of Antenuptial Contracts

Among the most important advantages of antenuptial contracts is that they are forward-looking as opposed to the normal community of property marriage which looks backwards and makes adjustment for the spouse who in terms of the marriage contract made by the parties, has less than the other.
Antenuptials therefore provide clarity to the married couple in terms of their assets going forward.
In addition, they can provide the couple with the freedom and choice to elect a system that is more appropriate for them than the default marriage regime (community of property). For example, the parties might prefer the ease of a system in which all their future earnings and assets fall into community of property, instead of having some assets ring-fenced for the benefit of the surviving spouse on the death of the one spouse.
In the case of second marriages, for example, the parties could choose a system more appropriate to their needs because their combined wealth may make it impossible for them both to marry in terms of the community of property regime.
Antenuptial contracts can identify property which will remain separate despite the marriage and can identify the person to whose estate it belong after the death of the person’s spouse.
Finally, they can have the advantage that by attempting to regulate a marriage out of the community of property, or give the spouse more protection than the law provides, they can reduce conflict in the event of divorce or separation.

Requirements for Valid Antenuptial Contracts

The formation of a valid antenuptial contract generally requires the presence of a legally enforceable agreement, mutual consent, consideration and an adequate description of the property being dealt with.
Often, placement of undue pressure on the parties to an antenuptial contract, or misrepresentation by one party, may result in a finding that there was no genuine consent. The mere execution of the antenuptial contract by the parties, without the satisfaction of all the other requirements, will not in itself be enough to find a binding obligation. In such an instance the court will look into the circumstances surrounding the execution of the contract in order to determine the genuineness of the parties’ consent. If it is found that genuine consent was lacking then the antenuptial contract will automatically fall away.
From a legal perspective the parties to an antenuptial contract are required to freely and willingly enter into the agreement; that they must actually consent to the terms of the contract, may not have been unduly persuaded or threatened to enter into the agreement and finally, have knowledge of the consequences of marriage in community of property.
The requirements for a valid antenuptial contract may differ from one jurisdiction to another. In most states, however, the intention of the parties to marry under a specific matrimonial property scheme other than in community of property has to be adequately expressed in the contract in order to comply with the applicable legal requirements.
In the absence of full disclosure by the parties of their respective assets and income at the time of the conclusion of the antenuptial contract, and the absence of their consent to enter into the antenuptial contract, the entire contract may be rendered invalid. It is therefore very important that full disclosure be given of all material facts pertaining to the joint estate, prior to the conclusion of the antenuptial contract.
In most states a joint estate created by virtue of an antenuptial contract must be established immediately prior to marriage, as the parties must declare their intention to create the joint estate before a marriage is entered into. Realisation of the joint estate often requires registration with the office of the relevant registrar of deeds and it must be recorded in the protocols of the deeds registries.

Common Provisions in Antenuptial Contracts

Antenuptial contracts contain various clauses which are intended to govern the use and distribution of property and to provide for spousal and child support obligations in the event of a marriage breakdown. Standard clauses include those pertaining to the classification of property, division regulations, spousal support and special compensation for pregnancy, child-bearing and child-rearing.
Classification of Property
An antenuptial contract will generally divide the property of the parties into three categories: (1) property owned and obtained by a party prior to the marriage; (2) property obtained during the marriage by gift, inheritance or special compensation for pregnancy, child-bearing and child-rearing; and (3) property acquired during the marriage which is neither a gift, an inheritance nor special compensation.
Division Regulations
Typically, the parties will agree in an antenuptial contract that any property classified as property of the marriage will be divided equally upon the dissolution of the marriage. The parties may also agree that they will be jointly and severally responsible for a mortgage, line of credit or loan secured during the marriage. In essence, the parties to an antenuptial contract will agree to divide their debt equally upon the dissolution of the marriage in addition to dividing their assets equally.
Spousal Support
In the absence of the agreement of the parties to the other terms of an antenuptial contract, the provisions regarding spousal support are best left to a court to determine after the breakdown of a marriage. Courts have the jurisdiction to set aside or reduce the amount of spousal support agreed to in an antenuptial contract if it is unconscionable, particularly where one party has a significant disparity in income at the time of the marriage and subsequently increases his or her income either during the course of the marriage or upon dissolution.
Special Compensation for Pregnancy, Child-Bearing and Child-Rearing
As an exception to the general equal division of property provisions, the parties may agree in an antenuptial contract that property obtained as compensation or damages for loss or disability arising in respect of pregnancy, child-bearing or child-rearing will not be included in the equal division. This kind of clause is particularly relevant to women because compensation arising from the pregnancy and childbirth are among the most significant identifiable losses suffered by women during the course of a marriage.

Challenges and Limitations

Although antenuptial contracts are a legal requirement in South Africa prior to a marriage, there are some limitations and potential challenges:

1. Limitations. There are limitations as to the content of an antenuptial agreement. For example, the law does not permit the scrapping of alimony or maintenance by way of an antenuptial agreement. Although parties can agree in an antenuptial agreement that they do not require maintenance from one another during the subsistence of their marriage, they cannot take any rights away from future children, for example, where they may prevent their spouse from paying maintenance to a child.

South African law does not permit parties to an antenuptial agreement to act contrary to public policy. An agreement, therefore, entered into by a minor will be unenforceable if it is contrary to public policy. An example of this is where a minor is married off to an older person to obtain financial benefit to pay for their studies. Antenuptial agreements entered into by minors can be validated by a court.

2. Enforceability. There are legal requirements for the registration of antenuptial contracts. If the relevant formalities are not complied with, the antenuptial agreement will be unenforceable .

It’s important to note that even where all the formalities of passing an antenuptial contract are complied with, it can still be set aside when it is entered into with the intention of defrauding creditors. An example of this will be where one of the spouses is declaring their assets as being subject to the accrual system in order to conceal the existence of assets from creditors with the intention of defrauding those creditors.

3. Challenges to an antenuptial contract. Although there is no provision in the Matrimonial Property Act 88 of 1984 for a challenge to an antenuptial agreement, it remains possible for a party to review the antenuptial agreement in accordance with the general principles of review set out in the Constitution, such as, rationality and the right to procedural fairness.

An antenuptial contract, however, will not be set aside simply because it’s unfair or unreasonable.
In certain circumstances, a court can set aside an antenuptial contract based upon pre-marital misrepresentation. This will be where an antenuptial contract has not been registered within a reasonable period after marriage in which an innocent party has suffered as a result of the delay.

How to Set Up an Antenuptial Contract

There are three critical steps involved in the drafting and formalising of an antenuptial contract. Step 1 – Deciding on the appropriate matrimonial regime In the drafting phase, the client should inform his or her chosen practitioner of their respective assets. Should the client not be aware of the extent of all their assets (some of which may be held in joint names, for example some immovable property), they should be encouraged to conduct a full disclosure with the practitioners before drafting commences. The best time to conduct such a full disclosure and to make sure that both parties understand the nature of the disclosure is immediately after the first consultation and prior to drafting. Once the assets have been accurately disclosed and a comprehensive account of the client’s assets has been provided, the options concerning the matrimonial regime should be explained as well as the consequences. Step 2 – Assessing the pros and cons The practitioner should ensure that the client understands the exact legal consequences of each regime. Once all options are considered, the couple can explore whether the pros of any one regime outweigh the cons. It is at this phase that the parties would ordinarily inform their attorneys of any special requests or deviations they may wish to include in their antenuptial contracts. It is important to note that the inclusion of any unconventional provisions may still cause the contract to be excluded in terms of Section 21 of the Act. Step 3 – Formalisation Once the attorney has drafted an antenuptial contract to the satisfaction of the parties, the signing phase can commence. On the basis of good faith, the couple must accept the consequences of signing the contract and should a party fail to disclose assets, the obligations of good faith will apply especially in the event of divorce. A marriage out of community of property requires such a contract so that protection is afforded to the children of the marriage. In the drafting phase, consideration must also be given to the interests of the children of the parties.

Antenuptial Agreements versus Postnuptial Contracts

Antenuptial contracts are often confused with postnuptial agreements. However, considerable differences exist between the two. In a traditional sense, an antenuptial contract is an agreement executed prior to marriage, where both parties disclose assets they bring into the union and liabilities they may have outstanding. In addition, they agree on what assets will be considered separate property and not part of the marital estate. It could also include provisions for alimony. By disclosing assets and liabilities, both parties have a better understanding of the assets owned, and how the two incomes may work together, once married. The antenuptial contract provides an opportunity to discuss any potential issues openly before entering the marriage and would be enforceable unless the other party can prove that the agreement was unreasonable and unfair when it was signed, or if there has been an extreme change in circumstances which makes the provisions of the contract impossible to perform. For example, if the husband, who has several rental properties, is killed in a tragic car accident shortly after the marriage, the wife will likely have the right to the rental properties, even if the property was defined as separate property in the agreement.
On the other hand, postnuptial agreements are executed after the marriage takes place . In this situation, the parties are now married and struggling with their financial situation, and want to separate out assets by making them separate property. Both parties will sign a postnuptial agreement which will require them to be very open and forthcoming about their assets. We have seen situations where the husband has just received a large bonus from work, and does not want to share the money with his wife. He will provide her some money from his bonus and in return, she agrees to sign a postnuptial agreement making the bonus income his separate property. Since the agreement is signed after the parties are married, it tends to be more scrutinized by the Courts than an antenuptial contract signed prior to marriage.
There are several variations of postnuptial agreements. The postnuptial agreement can be temporary so that it must be renewed within a period of time (such as 5 years). Or it can be permanent and made enforceable until the terms are changed. Many postnuptial agreements will address issues such as alimony, retirement accounts, equitable distribution of assets in the event of divorce, and neglect to cover inheritance issues. The lack of mention of inheritance may be significant, if parents provide assets to a married child and the postnuptial agreement specifically excludes the inheritance from being part of the marital estate.