An overview of the accrual system in terms of the Matrimonial Property Act

12.1

Declaration by the spouses of the commencement values of their estates

12.2

Some aspects to bear in mind

12.3

 

Indexation of excluded assets

 

[Page 12–3]

If the marriage of the deceased was subject to the accrual system as contemplated in section 2 of the Matrimonial Property Act 88 of 1984, the executor must compare the nature and extent of any growth in the deceased estate and that of the surviving spouse that might have taken place during the marriage for purposes of calculating the value of a possible accrual claim in terms of the Act. Such a claim may either lie in favour of the surviving spouse or in favour of the deceased estate, depending in which of the two estates the growth had been greater. The purpose of the Act was to introduce an additional matrimonial property regime in terms of which spouses can share in the material benefits of their marriage without the disadvantages of a traditional marriage in community of property (e.g. the sequestration of the joint estate upon the insolvency of one of the spouses). A marriage out of community of property (without accrual) where the estates of the spouses remain totally separated after the dissolution of the marriage by death may nevertheless also be detrimental to one of the spouses in various respects, which are not discussed here. The accrual system, as far as the proprietary rights of the spouses are concerned, is essentially a combination of a marriage in community of property and a marriage out of community of property in the sense that the estates of the parties are separated during the marriage but that the “fruits” of the marriage are shared upon termination of the marriage (either by death or by divorce). For the duration of the marriage, however, the spouses remain in full control of their individual estates. Please note that, should the estate of the one spouse be sequestrated, it has no bearing on the other spouse’s estate, provided that he/she is able to prove that he/she built up such estate from monies received from other sources than that of the now insolvent spouse. The accrual system can, therefore, be described as a type of “postponed community of profit” (see DSP Cronje and Heaton South African Family Law, LexisNexis Butterworths, second edition, par 7.4.3 at 98) .

Stripped to its essentials, the accrual system provides that the spouse whose estate shows the greatest growth is obliged to pay the spouse whose estate shows the lesser growth half of the difference between the two “accruals” when the marriage is dissolved (either by death or divorce). This may be explained by means of a very simple example. Say, at the commencement of their marriage, the estate of H amounts to R4 million and the estate of W amounts to R2 million. At the dissolution of the marriage by the death of H, his estate amounts to R12 million and that of W amounts to R6 million. (In this example, H’s accrual was R8 million and W’s accrual R4 million). W will thus have an accrual claim against her late husband’s estate in the amount of R2 million, being half of the difference between the two accruals:

H: 12 m – 4 m = 8 m; W: 6 m – 2 m = 4 m

... 8 m – 4 m = 4 m ÷ 2= 2 to W. QED.

It must be reiterated that the above is a very basic example solely for purposes of illustrating the underlying principle of the accrual system. There is more to it as will appear from what follows.

Section 4(1) of the Act provides that the accrual of a spouse is the amount by which the net value of his estate at the dissolution of his marriage exceeds the net value of his estate at the commencement of the marriage. For purposes of [Page 12–4] determining the value of such accrual, the following assets of the spouses do not form part of their respective accruals:

1.

Any amount received by a spouse during the subsistence of the marriage in respect of non-patrimonial damages, such as an award for defamation or an award in respect of general damages for pain, suffering and loss of amenities of life, e.g. as a result of a road accident.

2.

Assets excluded from the accrual system in terms of the ante-nuptial contract between the spouses, which implies that the executor must obtain and check the ante-nuptial contract.

3.

An inheritance, legacy or donation which accrues to a spouse during the subsistence of the marriage, as well as any asset acquired by virtue of his or her possession or former possession of such inheritance, legacy or donation (e.g. the spouse purchases a fixed property with money he/she inherited) unless the testator has stipulated otherwise, or a contrary arrangement was made by the spouses in their ante-nuptial contract.

4.

Donations between the spouses, other than a donation mortis causa.

 

Declaration by the spouses of the commencement value of their estates

This aspect is regulated by section 6 of the Act, which provides for the declaration by a spouse of the net commencement value of his or her estate in the ante-nuptial contract or by way of a notarised statement within six months after the date of the marriage. In terms of section 6(4)(b) of the Act the commencement value of a spouse’s estate is deemed to be nil if the liabilities of that spouse exceed his or her assets at the commencement of the marriage or if no commencement value was declared in the ante-nuptial contract or a notarised statement. The commencement value of the estate of a spouse, except where it is deemed to be nil according to section 6(4)(b), must be adjusted to make allowance for the effect of inflation affecting the monetary value of the spouses’ respective estates between the commencement of the marriage and the termination thereof. For this purpose the weighted average of the Consumer Price Index (CPI) that is published from time to time by Stats SA in the Government Gazette is used as prima facie proof of the fluctuation in the value of money .

[Page 12–5]

 

 

Example

1.

H and W married in December 1985 subject to the accrual system. According to their ante-nuptial contract, the net estate of H was R20 000,00 and that of W was R10 000. The CPI of December 1985 was 20,8. H died in May 2006 and the CPI for that month was 132,6. The respective commencement values of the spouses’ estates at the time of H’s death are adapted in terms of section 4(i)(iii) of the Act according to the following formula:

H:

(132,6 ÷ 20,8) × R20 000,00 = R127 500,00

W

(132,6 ÷ 20,8) × R10 000,00 = R63 750,00

2.

At the death of H in 2006, his net estate amounts to R5 000 000,00

3.

At the death of H, the net estate of W amounts to R1 000 000,00 and she will accordingly have an accrual claim against H’s deceased estate, which is calculated as follows:

Deceased estate:

 

Net value at date of death

R5 000 000,00

Less: CPI-adjusted commencement value

R127 500,00

Accrual therefore amounts to

R4 872 500,00

W’s estate:

 

Net value at date of death

R1 000 000,00

Less: CPI-adjusted commencement value

R63 750,00

Accrual therefore amounts to

R936 250,00

Because the accrual of W’s estate is smaller than that of H’s estate, W will have a claim against the deceased estate for half of the difference between the respective accruals:

Accrual deceased estate H

R4 872 500,00

Accrual W

R936 250,00

Difference

R3 936 250,00

Half of the difference, constituting W’s claim against the estate:

R1 968 125,00

 

 

12.2

Some aspects to bear in mind

1.

An accrual claim by a surviving spouse against the estate of a deceased spouse takes precedence over a testamentary disposition, a donatio mortis causa or to an inheritance according to the rules of intestate succession (section 4(2) of the Act). In view of the fact that the accrual claim of the surviving spouse is a liability of the deceased estate and such spouse actually becomes a creditor of the estate, problems may be experienced with the administration process in estates where the surviving spouse is not the sole [Page 12–6] beneficiary. The legislature was alive to this contingency and provision is made in section 10 of the Act to the effect that a person against whom an accrual claim lies (such as an executor of a deceased estate) may apply for a court order for deferment of the claim upon such terms and conditions as the court may impose. The problem may be solved by the surviving spouse’s abandoning his or her accrual claim or a part thereof, but the provisions of section 55(1) of the Income Tax Act, according to which any gratuitous renunciation of a right may attract donations tax, should be kept in mind.

2.

The calculation of the accrual claim by the executor should be submitted to the Master together with the liquidation and distribution account. If the surviving spouse is the sole heir, it may be argued that an accrual claim is only of academic interest and that it is not really necessary to reflect such a claim (see LA Kernick Administration of Estates and the Drafting of Wills third edition par 10 at 19). Kernick points out that some examiners at Masters’ offices adopt this attitude and it may be advisable to obtain a ruling from the relevant Master’s office before submitting the estate account in order to save time and effort.

3.

The amount of an accrual claim payable to a deceased estate by a surviving spouse constitutes deemed property of the deceased for estate duty purposes in terms of section 3(3)(cA) of the Estate Duty Act. Conversely, the value of an accrual claim payable by a deceased estate to a surviving spouse is an allowable deduction from the gross value of the estate in terms of section 4(1A) of the Estate Duty Act.

12.3

Indexation of excluded assets

Section 4(1)(b)(i) and 4(1)(b)(ii) of the Act contains no reference to the indexation of excluded assets or assets which were acquired with the proceeds of excluded assets. It is, therefore, not quite clear whether the value of such assets should also be CPI-adjusted as contemplated in section 4(1)(b)(iii). This problem is canvassed in some depth by Cronjé and Heaton (supra) at 102–103.

Whatever the position regarding other types of property may be (ie, that indexation is probably not required), it is submitted that the value of cash legacies and cash donations received by a spouse during the marriage should be indexed for purposes of calculating the end value of the estate of the legatee or donee.

 

Example

Say that H, in the above example, inherited an amount of R100 000,00 from his favourite uncle and that, on 10 July 2000, H received a cheque for this amount from the executor of his uncle’s estate. The CPI of July 2000 was 100,8. The value of the legacy is, therefore, adjusted as follows for purposes of its exclusion from H’s estate: 132,6 ÷ 100,8 ´ R100 000 = R131 547,62.

 

 

 

Written by Louwrens Koen Thursday, 02 February 2017 Posted in Antenuptial Contracts
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