Accrual and Your Estate: When Death Do Us Part

What is the impact of your Antenuptial Contract in your estate planning, more specifically with the application of accrual?

By: Nokuzola Cossie

The antenuptial contract (“ANC”) is not often associated with the euphoria of wedding planning and truth be told it is not as exciting as choosing a photographer, flower arrangements or stationery for the big day. However, long after the flowers have wilted, stationery disposed of and the wedding album relegated from the coffee table to the bookshelf, what is the impact of your ANC in your estate planning, more specifically the application of accrual? Accrual comes into effect at date of termination of the marriage either by death or divorce- the below focuses on the impact of accrual at death.

Accrual is either an asset or liability in the estate of the first dying spouse. Accrual means that the estate of the spouse whose estate has grown the least (having regard to the difference between the value of the spouses’ estates at the date of death of the first dying spouse and the value of the spouses’ estates at commencement of the marriage), shares in the estate of the spouse whose estate has grown the most, subject to terms of their ANC. By illustration, Bheki and Lana are married, their marital regime being out of community of property, subject to accrual. Bheki is the first dying spouse. In his Will he bequeaths R20 million to his wife and the residue to his parents, who are financially dependent on him. In terms of the provisions of their ANC, Lana’s estate has an accrual claim against Bheki, same which is calculated at R8 million. The effect in the administration and distribution of Bheki’s estate is that Lana is entitled to the bequest as well as the accrual claim value, resulting in the residue (having taken all death taxes into account) being significantly reduced. This was not Bheki’s intention, as the value of the residue may not be sufficient to maintain his parents.

Using the same illustration, if Bheki’s estate had the accrual claim against Lana’s estate, she would receive the bequest of R 20 million less R 8 million, to avoid her having to potentially liquidate assets to pay the aforementioned value to Bheki’s estate.

The above illustrates the importance of structuring one’s Will so that your intentions are met and in doing so considering your personal circumstances, some which would include the impact of accrual.

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