Floris Slabbert, Country Manager at Ecsponent Financial Services says “remember that you won’t have a divorce do-over opportunity. You could be stuck with the negative consequences of poor decision-making for life. Try to put your feelings aside and focus on securing your financial future, without rushing through the process."
Slabbert shares his top tips to help you cope with the financial aspect of divorce.
1. Gather copies of all documents relating to your legal and financial lives. Not only does this ease the legal proceedings, it also means your spouse won’t be able to hide their assets.
Even during the best of times, it can be extremely difficult to keep track of all these ever-changing financial components, and when a couple decides to divorce, that task of dividing their joint portfolio is automatically complicated. That is why having easy access to the necessary documents goes a long way in making the task less laborious.
2. Take a look at your marital agreement. Is it in or out of community of property? Did you have a pre-nup with or without accrual? Or were you living together for many years and signed a contract with your partner? Your contract will determine how your assets are split.
3. Make a list of joint and separate assets and liabilities. If you’re married out of community of property, you can transfer assets you own into your own name and into your own accounts. Also, don’t give up joint assets without sound legal and financial advice and be sure to record everything in your final settlement document. Remember you remain liable for joint liabilities and any repayment arrangements must also be agreed upon and recorded.
4. Split the retirement income, not the fund. Many wives, especially, rely on their husbands’ retirement funds because they take time off work to care for the children or by mutual agreement. When they divorce, it is tempting to insist on an immediate split of the husband’s retirement fund. However, apart from the tax implications of early withdrawal that will reduce the value of the fund, there is also an opportunity cost.
In 2007, the Pension Funds Act 24 of 1956 introduced the ‘clean-break’ principle. This allows retirement funds to deduct an amount or percentage upon divorce from a member’s benefit and pay it to the non-member spouse or to a retirement fund of their choice. The clean-break principle allows a non-member former spouse to access an agreed or court-ordered share of the member spouse’s retirement savings on divorce.
Settle on a portion of the income and lump sum amounts at the time of retirement or transfer your portion to your own fund.
5. Get proper valuations of all assets. Getting professional valuations of your joint and separate assets is worth the time and money spent. It will give you peace of mind that if things take a turn and become hostile, you know exactly what your assets are worth.
6. Insure your partner’s life. If you receive spousal or child support, it is prudent to secure that income stream through life insurance that will replace the income in the event of your ex’s death.
7. Take any tax implications into account. A divorce may have tax implications to consider get professional advice to be on the safe side.
8. Update your will. A divorce changes your family structure, so it is vital that you update your will accordingly. The Wills Act, 1953 (Act 7 of 1953)says that, except where you expressly state, a bequest to your divorced spouse will be deemed cancelled if you die within three months of the divorce. This provision is to allow a divorced person a period of three months to amend their will, after the trauma of a divorce. If you don’t update your will within three months after your divorce, your divorced spouse will benefit as indicated in your will.