Financial security in divorce

Divorce is, tragically, a very common occurrence. According to Statistics South Africa, one in five marriages end in divorce in SA - and this is low in comparison to world standards.

While going through a divorce can be overwhelming, some careful planning can help you overcome the more practical hurdles, ensuring that the settlement will be fair, and that you will be financially independent once the divorce is finalised.

Lisa Griffiths, associate director of BDO Wealth Advisers suggests the following seven steps for those who are facing the prospect of their marriage ending.

1. Establish a team of professional advisers

It’s vital that you find your own lawyer and financial planner. “Their role will be critical in analysing the financial data,” says Griffiths. 

Your lawyer and financial planner should not be the same as those who will represent your spouse, as there will be a conflict of interest.

2. Gather all of your financial information and documentation

“You need to be fully aware of the complete and complex financial situation facing you. Understand all of your debts — not only what the two of you have jointly, but also individually,” advises Griffiths.

Include in your assessment your credit card accounts, home loans, car finance, personal loans, business debts, and retail accounts. “You must be prepared to disclose your full financial status,” notes Griffiths.

Having a full understanding of your finances early in the proceedings makes it much easier to navigate the divorce negotiations. Griffiths suggests keeping a second copy of these records in a safe place.

3. Establish your own financial identity

It’s important to have a solid grasp of your financial standing, including your credit record. Griffiths recommends sourcing your credit score and report, and opening accounts that are solely in your name.

“This includes cheque, credit card, and savings accounts, retirement plans, and insurance. You should rout all of your deposits and salary payments through your own account,” says Griffiths.

4. Make a plan with your bond repayments and/or rental agreements

When it comes to property, it’s advised that you consider your options, especially if you own or rent a property jointly. Payments will be expected by the bank or landlord regardless of your personal situation, and any missed payments will reflect badly on your credit profile.

“While you may want to move out and on as soon as you can, doing so may hurt your claim on the property,” Griffiths says.

“For those who share the bond or rental payments, you’re jointly responsible for this financial commitment. In some cases, the two spouses can come to an arrangement about who keeps the house and what concessions are to be made. However, often the sale of a jointly-held home is a cleaner process,” notes Griffiths.

5. Update your will

When there is any life changing development in your life, it’s important to update your will. This includes the birth of a child, the death of a loved one, and a divorce. If you have a joint will as a couple, it’s important to get a new will drafted in your name. If you already have a will in your own name, adjust it to account for your change in situation, including the divorce settlement agreement.

“You need to discuss and consider various issues such as who would be the executor of the estate or, if you have children, how children from your current marriage may be treated when compared with possible children or stepchildren from a future marriage,” says Griffiths.

6. Child maintenance

If you have any children, child support will be an important issue when it comes to your divorce settlement.

“As parents you should (hopefully) be able to amicably come to an agreement that is equitable to the children and that doesn’t affect their accustomed needs. If you won't have primary custody of the children, accept that you’ll be paying some form of child maintenance,” says Griffiths.

She adds that the amount paid in child support is up to you and your spouse, and depends on your financial situation. If you cannot come to an amicable decision, the court will place the child’s needs come first, and you will be at the mercy of a court-imposed decision based on the information presented by your attorney.

7. Be observant

Unfortunately, it’s not uncommon for a soon-to-be ex-spouse to act in an unethical manner. Griffiths cautions that you should be on the lookout for any signs of unusual expenditure, and pay attention to any unusual paperwork that may relate to your assets.

Griffiths concludes, “The above advice can save both you and your ex a lot of financial and emotional pain. It will also make it so much easier to establish your own life after the divorce.”