The Social Readjustment Rating Scale (SRRS), more commonly known as the Holmes and Rahe Stress Scale, ranks divorce as life’s second most stressful event, with death of a loved one ranking as number one. If you’re unhappy in your marriage and are contemplating divorce, refrain from making any impulsive decision before you have adequately explored the potential financial implications of a divorce order. Here are 9 things to know about getting divorced:
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You may have a claim for a share of your spouse’s retirement fund
Many spouses, especially those that have chosen to stay at home to raise children, fear filing for divorce because all the investments and retirement fund money is invested in the name of the working spouse. If find yourself in this position, keep in mind that you may be able to claim a share of your spouse’s pension fund on divorce, although this will depend largely on how you are married. In terms of legislation, divorcing couples can share in each other’s retirement benefits at the date of divorce to ensure that there is a clean division of assets on divorce. The marital regime does however determine to what extent the non-member spouse can share in the member spouse’s retirement benefits. The spouse who is not a member of a retirement fund can claim a share of the member spouse’s pension interest, being a notional amount based on the benefit the member spouse would have received from his retirement fund at the date of divorce. The pension interest calculation is a complex one and is dependent on the type of retirement fund/funds the member spouse is invested in. Importantly, note that pension interest claims are complex in nature and should be handled by an experienced divorce attorney together with your financial advisor.
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It’s possible to obtain an interim maintenance order
If you’re concerned about how you will survive financially in the period between separation and the finalisation of your divorce, speak to your divorce attorney about bringing an application for interim relief. This type of application can be brought via the magistrate’s court (Rule 58 order) or via the High Court (Rule 43 order) and is designed to provide interim assistance to divorcing spouses. The application can be in relation to interim childcare, maintenance for the spouse and/or children, enforced payment of costs such as school fees and bond repayments, or financial assistance with legal fees. Keep in mind that the spouse bringing the application must demonstrate that he/she does not have the financial means that the other spouse can realistically afford the amounts being sought.
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Spousal maintenance is not a right
When a couple is legally married, a reciprocal duty of support is created which means that each spouse is obliged to provide for the other to the extent that they are able to. Upon divorce, this duty of support comes to an end when a marriage is dissolved through death or divorce. While the Divorce Act makes provision for the court to make orders relating to spousal maintenance, it is important to keep in mind that neither spouse has a statutory right to maintenance. The court has full discretion relating to such orders, including the discretion to award no maintenance to the spouse applying for spousal support. This is because our law seeks prefers a clean division of assets at divorce in order that each spouse becomes economically independent of the other as quickly as possible. As such, do not assume that your spouse is legally obliged to provide you with maintenance following the divorce, but rather spend time working out how to become financially independent following once the divorce is finalised.
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You may be liable for some of your spouse’s debt
The financial implications of a community of property marriage can be quite onerous especially when it comes to debt. If married in community of property, you and your spouse have a single, joint estate which you own together in equal, indivisible shares – including all debt that was incurred both before and after the date of marriage. This means that, upon divorce, you could find yourself responsible for 50% of all your spouse’s debt, and vice versa. This is why it is advisable to enter into a customised antenuptial contract before getting married.
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It’s possible to apply for a redistribution of assets
When it comes to marriage in community of property, a court can in certain circumstances award what is known as a forfeiture of benefits in terms of which one spouse would then not be entitled to his share – or part thereof – of the joint estate on the grounds that he did not contribute equally to the finances of the marriage and that sharing half of the estate would result in him benefiting unduly from the marriage. When considering such an order, the courts are required to take into account the duration of the marriage, the circumstances that led to the breakdown, and whether there was substantial misconduct on the part of either spouse. Again, it is advisable to navigate this process together with an experienced divorce attorney.
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There are hidden costs to running two households
While we all know that divorce is expensive, many do not consider the many hidden costs of running two households. Remember, many of your current household expenses are assuaged as a result of you living together, and many of these expenses will not necessarily reduce proportionately following your divorce. Besides for rental and groceries, consider costs such as short-term insurance, cleaning and garden services, psychologists and counselling, aftercare and childcare, medical aid premiums, life insurance cover, retirement fund contributions, connection services and subscriptions.
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It’s possible for a spouse to hide assets from the divorce proceedings
It is not uncommon in particularly acrimonious divorces for a spouse to hide assets in a trust structure in the hopes that those assets will be excluded from the divorce order. While the general view is that trust property does not form part of the spouse’s estate for the purposes of determining the value of a divorce order, there are circumstances in which the courts will look through the veneer of the trust to establish whether or not the trust founder is misusing the trust. In considering the matter, the courts will look at when the trust was created, the purpose for creating the trust, whether any conflicts of interest exist, and whether the trust founder has given up de facto control of the trust assets. A recent SCA ruling found that, in the case of a divorcing couple, the veneer of the trust could be pierced and that the trust assets should be included when calculating the accrual as the trust was essentially a sham trust founded to deceive his wife.
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You should update your Will within three months of divorce
Not updating your Will after your divorce can have disastrous consequences and may result in your spouse unintentionally inheriting from you. Section 2B of the Wills Act specifically deals with circumstances where a person dies after having been divorced, providing a three-month leeway for divorcing spouses to amend their Wills in line with their new circumstances. This means that if a person dies within three months of her divorce, her estate will be distributed as if her ex-spouse had died before her. In other words, her ex-spouse will not stand to benefit from her estate. However, after the expiration of three months and in the absence of an amended Will, it will be assumed that the testatrix intended for her ex-spouse to inherit in terms of her Will. Importantly, when you do amend your Will following a divorce, be sure to include a clause which specifically revokes all previous Wills and make sure your new Will is clearly dated so there is no confusion as to the latest Will. If you have a separate Will for your foreign assets, be sure to update this as well. Further, if you have appointed your ex-spouse as the executor in your Will or as a trustee to a testamentary trust, be sure to make changes where necessary.
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The accrual calculation can be complex
While the accrual system is undoubtedly the most equitable marital property regime, keep in mind that the accrual calculation – which only comes into effect on death or divorce – can be complex, making your antenuptial contract a hugely important document. The ‘accrual’ refers to the net increase in the value of each spouse’s estate since the inception of the marriage. Whatever belongs to each spouse prior to the marriage, both assets and liabilities remain theirs; but whatever they build up during the subsistence of the marriage belongs to both of them and should be shared equally. Remember, in terms of the accrual system, the estate of each spouse remains completely separate until the time that the marriage dissolves. At the time of divorce, only property acquired during the marriage will be taken into account. To calculate the accrual, the liabilities of each spouse are deducted from the assets of each spouse, less any inheritances, legacies or donations. The commencement value of each estate is deducted from these respective amounts, adjusted by CPI, to arrive at the accrual in the estate. The value of the smaller estate will then be deducted from the value of the larger estate, with each spouse having a 50% claim to the difference.
Have a super day.
Sue
