Marriage and money

2011-03-19 09:14

Your finances during marriage

Your own bank account

1 Although you may share a bank account for household expenses, make sure you have your own account so you can transact independently. Although banks allow for joint accounts, there is always a principal member.

If the principal member dies, the account is immediately frozen. If your salary was being paid into the account, you could find yourself in financial difficulty while the estate is wound up.

Also make sure that you have your own emergency funds in an easily accessible account. If something happens to your partner and you need to access money urgently, you don’t want to be in a situation where you need his or her signature. “Keep in mind, though, that half of the funds will be your partner’s if you are married in community of property,” says Angelique Visser, head of products at FNB Trust Services.

Your own will

2 It is possible to have a joint will with the wishes of both spouses. However, this is not practical.

Should one of you pass away, the will has to be sent to the master of the court and, on the death of the survivor, the family may not know that the original joint will is filed with the master of the high court.

It could either delay the administration process or, even worse, the estate could be administered in terms of the intestate laws, and the beneficiaries may be different from the ones nominated in the will.

If you have children or any other dependants, such as elderly parents, it is important that you make provision for them in your will even if your spouse survives you.

Should your partner remarry, they may not make provision in their new will to provide for the children. In addition, should your partner remarry in community of property, your partner’s estate would then be combined with the new spouse and your partner may not have the right to leave a significant inheritance to your children.

Currently, any money in the estate can be transferred to your spouse free of estate duty. However, you can bequeath an amount of R3.5 million to another person without incurring estate duty.

Consider leaving a portion of your estate to your children in order to provide for them financially in a trust until they reach a suitable age to inherit, and make sure there is an independent trustee to take care of the children’s financial wellbeing.

Dushen Naidoo, chief executive of FNB Life, says that in order to protect minor children you should appoint a guardian, should both you and your spouse die simultaneously. This is a requirement in terms of the Children’s Act. Also create a testamentary trust to ensure that assets are protected and managed until your children are adults.

you can afford to, it is a good idea to consult a lawyer to ensure that your will fully represents your wishes. “The choices you make in your will can have significant costs and tax implications for your beneficiaries,” says Naidoo.

The law is complicated and changes from time to time so it is important that you have someone who can keep abreast of these changes.

Naidoo says it also very important to have a will if you are not married legally, such as a customary marriage, because your partner will not automatically inherit from your estate.

It is also important that your partner has a will and that you understand the provisions of that will.

Your finances upon divorce

Your pension fund

1 Depending on your contract and your divorce settlement, spouses are entitled to a portion of the member spouse’s pension fund. The non-member can elect either for the funds to be paid out or be transferred to a pension fund.

Statistics show that about 97% of divorcees receive cash payments. “This may seem appealing, but drawing on retirement savings plays into the hands of the taxman. Not only is the withdrawal treated as taxable income in your hands, you also lose out on the tax-free lump sum amounts you would otherwise receive on retirement,” says advocate Richard van Helden, co-founder of LawUnlocked

Rather have your share transferred into your own retirement fund. You can set up a preservation fund, which would receive the transfer tax-free, and you will still be able to make withdrawals from this fund in future, even if you haven’t reached retirement age.

Tax implications

2 2According to Van Helden, you need to use after-tax figures to calculate your

divorce settlement. This is critical as you may think your financial future is secure when you’re presented with what looks like an attractive settlement proposal.

Protect your assets

3Remember to finalise the registration or transfer of assets between you and your former spouse at the time of your divorce. Postponing this will only complicate matters when either of you dies. If your former spouse is liquidated, those assets can be attached.

Protecting the children

4 Divorce settlements often require the breadwinner to take out a life assurance policy in favour of the ­­former spouse. Make sure you’re properly protected by this mechanism.

“It is not enough to be the named beneficiary on the policy. Your ex-husband or wife could strip you of your financial security at any time by simply changing the policy beneficiary,” says Van Helden.

“To avoid this, it’s essential that you’re named as the owner of the policy, with your ex-partner named as the life assured and payer of

the policy.”

Updating your will

5 You need to update your will within three months of your divorce being granted. The importance of this timing is that after this three-month period, should your ex-spouse still be named as a beneficiary in your will, he or she will inherit from your estate regardless of your circumstances. You could even have remarried and have had children born from the second marriage (this actually happens!).

Maintenance claims

6 If you have children and file for divorce, your ex-spouse is obliged to continue to support the children.

You will need to draw up a full breakdown of the costs of caring for the child, which will be presented to the court.

For the court, the behaviour of the parents is not important. The interests of the child are what count.

You can claim maintenance from your spouse if you were dependent on him (or her), regardless of the marriage contract.

Maintenance is regarded as the legal obligation to fund someone else’s living expenses.

(Remember that a wealthy wife may be subject to a maintenance claim from a less financially successful husband, even if she has custody of the children. It works both ways.)

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