When it comes to the financial implications of a divorce, there are a few things to consider in a divorce agreement.
The decision to get divorced is not an easy one for couples to make as it’s the first step to a process which can be time consuming as well as emotionally and financially draining.
This article is part one of a two-part series that takes a look at all the things to consider in a divorce agreement, and how to survive it financially.
According to South African marital law, there are two main marital property regimes:
The first and arguably one of the most important things to consider in a divorce agreement is what marital regime you are married under.
This will ultimately determine how assets and estates will be divided between you and your soon-to-be ex-spouse.
In fact, it’s advisable to understand the different marital property regimes before you get married, so that you can be prepared for what is to come in the event of a divorce.
For more information on the different marital regimes and what they entail, click here.
Divorce in and of itself can be a costly affair. However, the logistical costs involved with separating two homes and lives can be massive.
These costs can include everything from moving costs to buying new furniture, rental deposits, bond transfer costs and subscriptions such as security and internet.
Therefore, in the face of potential or imminent divorce proceedings, cutting back on unnecessary spending can help you prepare financially for the inevitable costs that come with divorce.
Because of the uncertain and long-winded nature of divorce negotiations and proceedings, it’s important to make sure that your medical aid membership does not lapse.
Depending on the terms of the divorce order, it may be that one spouse becomes liable for the payment of the other spouse’s membership premiums for a set period of time after the divorce is finalised.
However, if you let your membership lapse, you will have no medical aid coverage and after re-application for membership, you may be subject to waiting periods and exclusions. This can all result in further financial implications as you may be required to pay for medical expenses out of your pocket.
According to the Divorce Act, retirement funds form part of a member’s assets. Therefore, retirement funds are taken into consideration when dividing assets in the event of divorce.
If you are married in community of property you may immediately claim your share of your ex-spouse’s benefits from their retirement funds in the following ways:
However, the divorce order must be extremely clear in order for you to claim your share of the benefits.
Now is the time to invest whatever capital you may gain from the divorce, however tempting it may be to cash it out and spend it on decorating your new home.
Being solely responsible for your financial future is far more stressful than having shared capital and preserving whatever capital you can by reinvesting it is the wisest thing to do.
In cases where you and your spouse have life policies that provided for each other in the event of death, it’s advisable to revisit these policies and change your nominated beneficiaries to prevent your ex-spouse from inheriting unintentionally.
The same goes for your last will and testament. The Wills Act allows a period of 3 months following the divorce to amend your will to avoid unintended consequences should you be deceased.
It’s likely that your income needs have changed drastically since the divorce, resulting in the need for more income than you have had in the past in order to meet your financial obligations.
At this stage, setting up a meeting with your financial planner to adjust your budget and overall plan to meet your current and future financial needs based on your new circumstances is of utmost importance.
If you do not have a financial plan in place, now is the perfect time to meet up with a financial advisor who is trained and qualified to help you make sound financial decisions for today and for your future.
Our divorce attorneys are available to provide you with legal assistance and support throughout your divorce negotiations and proceedings.
We remain committed to providing sound legal advice to ensure the process of divorce is as stress-free as possible for our valued clients.
For further advice on things to consider in a divorce agreement, please feel free to contact us and keep an eye out for part two of this series.
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