Last week we chatted to Charné van der Walt, the financial planner behind Lemons into Lemonade Financial Advisors about drawing up your wedding budget (read about it here). This week, she’s back with even more great advice!
When it comes to planning your wedding, often the last thing on your mind is a prenup. But here’s the thing: putting together a prenuptial agreement (also known as an antenuptial contract or ANC) isn’t about planning for your marriage to fail: “It’s about protecting both you and your partner from financial stress in the long run,” explains Charné. “Think of it as protecting your marriage for the future.”
So, what is an antenuptial contract (ANC)?
“Antenuptial simply means ‘before marriage’,” explains Charné. “So it’s a contract that you draw up before your wedding date. It’s a legal document, which means it can only be drawn up by a lawyer, and it determines what happens to each other’s assets should your marriage end, either because of divorce or death.”
How do I set one up?
“Contact a few attorneys to get quotes first,” advises Charné. “Find out what their quotation includes – for example, does it include both a consulting session to discuss options as well as a second session to draw up the document? Ideally, you need both.”
Wait – why do I need a contract for my marriage?
“The South African legal system allows you to get married in three different ways,” says Charné. “In community of property, out of community of property with accrual, and out of community of property without accrual. It’s your choice which option you go for.”
1 Getting married in community of property
“This is what I call the ‘all in’ option,” explains Charné. “When you get married, all of your and your fiancé’s assets and liabilities (ie debt) are joined as one. This means that, at any point in your marriage and at death or divorce, you each own 50% of the other’s assets and debt. So, for example, if you own a flat and he owns a flat, you each own 50% of the
other’s property. Similarly, if he has credit card debt, you’re liable for 50% of it. For this reason, marrying in community of property isn’t always a good plan – if your partner defaults on credit card repayments, for example, his poor credit rating will affect yours too. Remember, if you don’t make an active choice to draw up an ANC, you will by default be married in community of property.”
2 Getting married out of community of property without accrual
“This is what I like to call the ‘all mine’ rule,” continues Charné. “All of your assets and liabilities stay yours – exactly as they were before you got married. So your financial decisions do not legally affect your spouse, nor do his you. The advantage of this is that if something bad happens to either of your finances, the other’s finances aren’t negatively impacted – so if you default on a payment, your partner’s credit rating doesn’t worsen, for example. But here’s the con: if you decide to be a stay-at-home mom, or you’re out of work for a while, you’re not entitled to any of his assets or income if you get divorced, even though he earnt them while you were married.”
3 Getting married out of community of property with accrual
“I call this option the ‘then me, now us’ rule,” explains Charné. “If you choose this option, then you get to decide which assets and liabilities you own independently, and which ones you share in your marriage. For example, you can choose to keep your debts separate, so that your partner’s credit rating doesn’t affect yours, but decide to share assets like property, so that both of you will benefit from it financially should death or divorce occur.
“Here’s an example: let’s say Jim owns a property worth R1 million before he gets married to Sue. They agree to include the property in the assets they are to share when they get married in community of property with accrual. Five years later, the property has increased in value to R1.4 million. This means that if Jim and Sue get divorced, Jim will keep the initial R1 million value of the property, but Jim and Sue will have to divide the extra R400 000.”
So, how do I choose?
“Deciding which option works for you is dependent on your specific situation,” says Charné. “The best thing to do is to ask the advice of an objective attorney – one who has no reason to be biased towards either you or your partner. Then you can discuss how the different options will affect you. Once you’ve spoken to an attorney, I’d also recommend consulting an authorised financial advisor about your options – an attorney should give good legal advice, but you want a professional financial opinion, too. The key here is to make a choice: don’t ignore it and hope for the best. Before you get married, always consult an attorney and make a conscious decision about which of three legal ways you should be married.”
DOs and DON’Ts for deciding about an ANC
DO your homework
“Be open minded, study the options on your own and ask questions to the attorney before and during your appointment,” advises Charné. “Never sign a contract at the first appointment. Rather, make notes and discuss it privately with your fiancé before committing.”
DON’T think that an ANC is only relevant if you get divorced
“Each legal option for marriage doesn’t just affect you if your relationship breaks down,” warns Charné. “It will also affect many aspects of your married life, such as financial decisions you make together in the future, as well as important issues like your will.”
DO be in agreement with your fiancé
“Make sure you and your fiancé are 100% happy with your choice and the content of your ANC before you sign it,” advised Charné. “Be honest about your concerns with your partner, and about your financial status and his. Lying will only lead to heartache further down the track.”
DON’T wait until a month before your wedding
Why? “Because it’s a big decision, so you don’t want to rush it,” says Charné. “Yes, you can change it after your marriage, but only at great cost.”
DO remember your will, too
“Many couples are so focused on their ANC that they forget to attend to their will,” says Charné. “If you don’t have a will, dealing with your estate after death becomes very tricky for your partner and family. And remember to update your will regularly – when you get married, you may want to adapt your will to include your partner.”
Would you get a prenup, or do you think it’s completely unromantic? Tweet us at @GLAMOUR_sa with #GLAMWedding to share!
Read Charné’s tips for managing your wedding budget here!
