The division of assets on divorce

The manner in which your assets will be divided in the event of divorce depends largely on the nature of your matrimonial property regime. Your marriage contract, which sets out the financial consequences of your union, will likely form the basis of your divorce negotiations – although it is important to keep in mind that there are numerous variables and legal mechanisms which can impact how your assets will ultimately be divided. Here are some factors to consider:

  1. You and your spouse have full contractual capacity: While the nature of your matrimonial property regime is fundamental to your rights and those of your spouse in the event of divorce, it is important to keep in mind that you and your spouse have full contractual capacity to negotiate a divorce settlement that suits your needs. This means that you can choose to strictly enforce the terms of your marriage contract or negotiate a settlement that you each find more acceptable to your specific circumstances. Whereas some divorces can enormously acrimonious, there are couples who seek to secure an expedient, amicable divorce that is equitable to both parties. In such circumstances, a couple is free to determine how they wish their assets to be divided amongst them, meaning that they are not bound to follow the letter of their marriage contract.
  1. Mediation may be a better option: If you and your spouse cannot reach agreement on the division of assets on divorce, it is worth considering a mediated divorce. Not only does mediation offer a more cost-effective solution to protracted adversarial legal proceedings, but it is likely to ensure that the divorce settlement is expedited – allowing each party to achieve closure and move on with their lives. Our courts encourage divorce mediation and take an unfavourable view of parties who refuse to take a conciliatory approach. Generally speaking, expert divorce mediation attorneys charge around R1 500 to R2 000 per hour, plus an additional fee of between R2 000 and R5 000 for the drafting of the divorce settlement agreement. Many mediators offer a package deal which includes a set number of mediation sessions, settlement agreement, parenting plan, and the securing of the divorce order.
  1. Emotional decisions can cost you money: It’s only natural during divorce proceedings that emotions will run high, but keep in mind that making emotional decisions may not be in your best financial interests and can cost you in the long run. That said, it can be difficult to set one’s emotions aside and make objective decisions so consider seeking advice from a financial advisor who can guide you independently and dispassionately through the various financial decisions that need to be made. For instance, while you may be intent on holding onto the family home because you believe it to be in the best interests of your children’s emotional well-being, the numbers may not support the decision. Besides the ongoing costs of maintaining a large home, having a large portion of your divorce settlement held in an illiquid asset may leave you stressed and cash-strapped which, in turn, could affect your children in other ways.
  1. You may have a right to a share in your spouse’s retirement fund: If your spouse contributes to a retirement fund, it is possible that you have a right to a share of the invested capital. In the context of divorce, this is referred to as a ‘pension interest’ which is in essence a notional amount based on the benefit that the member of a retirement fund would have received if he had retired at the date of divorce. The purpose behind the pension interest calculation is to allow divorcing spouses to share in each other’s retirement benefits at divorce rather than having to wait until formal retirement to share in the funds. Whether or not you have a right to share in your spouse’s retirement fund is determined largely by the nature of your matrimonial property regime and the type of retirement fund the member spouse is invested in. Pension interest calculation is a highly technical area of retirement planning and is best undertaken with the guidance of an experienced financial planner. Further, the wording of the divorce order in respect of ensuring that the pension interest award is actionable by the retirement fund is subject to stringent criteria and should be handled by an experienced divorce attorney.
  1. Trust assets are (generally) excluded from the divorce settlement: The general position in South African law is that property held in trust is not considered part of a spouse’s estate for the purpose of determining the value of an estate on divorce. However, a recent Supreme Court of Appeal judgement has shed light on the practice of using trusts to hide assets from divorce proceedings, thereby frustrating the process of equitably dividing the assets. So, while the general view is that trust property does not form part of the spouses’ respective estate for the purpose of dividing assets on divorce, the courts of have held that there are circumstances in which they will look through the veneer of the trust to establish whether or not the trust founder has in fact misused 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.
  1. You may be able to claim a redistribution of assets: Until recently, Section 7(3) of the Divorce made provision for spouses who were married out of community of property before 1 November 1984 to approach the courts for a redistribution of assets. This is because before this date, marrying couples did not have the option of incorporating the accrual system into the marriage contracts and, upon divorce many spouses (predominantly women) found themselves walking away from the marriage empty-handed. However, a 2022 court ruling found that this section of the Divorce Act was inconsistent with the Constitution in that it discriminates against those married after 1 November 1984 with the exclusion of the accrual as it does not provide the same right to claim transfer of assets from the other party as that provided to parties married out of community of property before 1 November 1984. In terms of this ruling, couple who were married after 1 November 1984 without the accrual system could be able to invoke Section 7(3)(a) and claim an equitable portion of the other spouse’s assets upon divorce. Note, however, that this claim is not an automatic one and the spouse claiming the redistribution order would need to prove her direct or indirect contributions to the marriage to the extent that they contributed to the growth of the other spouse’s estate. Further, it is important to note that this ruling still needs to be confirmed by the Constitutional Court.

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