How not to get screwed in a divorce
This time of the year is busy on the personal front. Lots of family and together time can result in two things, new relationships and divorce. Unfortunately over 50% of marriages now end in divorce, so the prospects of splitting assets with your spouse is a reality for far too many people. There are some things that you can do before and during your marriage to make this more financially equitable.
- Don’t be a cheapskate – get a prenup (Anti Nuptial contract). Yes, they are usually only as good as the divorce lawyer, but it’s a good start. Community of property is antiquated and can open up the family unit to significant risk. Remember it is community of property AND LOSS.
- If you’re already married in Community of Property, seriously think about setting up a trust, especially if either of you has their own business. Primary properties are better in your own name, but companies, secondary properties, investment portfolios might well be better off in a trust. A trust has to act in the interest of all the beneficiaries or it will be considered a ‘sham’ trust. In many ways a family trust forces spouses to behave like grown-ups – especially if children are the beneficiaries.Life policies owned by the trust are also a good option. Even if you’re married with an ANC, a trust might be a good idea.
- Take out life insurance on each other. In other words the husband owns a life policy on his wife and visa versa. Only the owner can change who the beneficiary is, protect yourself and the children in the future. If you set up a trust, look at making the trust the owner.
- If either of you have significant assets going into the marriage, make sure these are clearly set out in the prenup (most people can’t be bothered). Put major assets in both your names.Continue to pay into your retirement funds during maternity/paternity leave. Your pension fund can be split during a divorce – avoid it if you can by trading other assets.
- Both partners must have a retirement fund.
- If one of the partners agrees to stop working to look after children, that spouse’s retirement fund and future earning capacity must be protected in a formal agreement.
- If you get an inheritance, don’t mix it with your existing expenditure – buy a clearly demarcated asset. Inheritances don’t form part of your estate on divorce.
- If it comes to divorce, act like grown-ups. Don’t waste tens of thousands on lawyers fighting for every last cent. Get your financial advisor to do individual financial plans and draw up a joint balance sheet, then see a mediator. If you can go to a divorce lawyer with the settlement all ready to be typed up and signed – it will cost you a fraction of what it would otherwise. Save your energy and wealth for rebuilding your life, not screwing over your ex. Let it go. When it’s over, it’s over.
- Be aware that shares in a company will be regarded as an asset, unless you want your ex-spouse sitting next to you at board meetings, make provisions.
- If you have minor children when you get divorced, make the cession of a life policy part of the divorce decree. Cede it to the children if you’re not paying alimony. Being a beneficiary isn`t good enough, that can be changed in thirty seconds. Change the beneficiaries on all your life policies immediately – these aren’t distributed in terms of your will but according to nominated beneficiaries. No, don’t nominate the estate as a beneficiary on your policies – it just gives the executor a nice little windfall.
- NEVER abdicate the responsibility for the family’s wealth to one or other partner. No matter how boring you find it, stay involved. If necessary find your own advisor who you can understand, and you can ask for help if financial decsions are being made that you don’t understand.
- Rewrite your will immediately. If it hasn’t been changed within 3 months of the divorce, then it will stand.
Author Dawn Ridler