Money Talk For Those Dealing With Divorce

Real-life love stories don’t always have the proverbial happily ever after, with four in ten couples getting divorced before their tenth wedding anniversary. Sadly, this is true for TV personality Minnie Dlamini and her husband Quinton Jones, who recently announced the difficult decision to part ways after four years of marriage. For couples facing the prospect of divorce, it is an emotionally taxing time which sees changes to almost every aspect of your life, not least of all your finances.

“There are many financial considerations when getting divorced and it can be incredibly overwhelming to know where to start, especially when emotions are running high,” says Lee Hancox, Head: Channel and Segment Marketing at Sanlam. “As someone who has experienced these challenges first-hand, I strongly recommend getting a financial adviser involved from the start to give you the confidence that your financial wellbeing is protected.”

“For example, if you have children, your adviser may suggest that you take out a life insurance policy specifically to cover maintenance obligations. Not having this could lead to uncomfortable situations should your ex pass away. Maintenance is a preferential claim on the estate, which means your ex-spouse’s beneficiary may be forced to sell assets, to free up cash to cover your claim. You will also need to consider making changes to your retirement planning, especially if your ex is entitled to half of your pension,” explains Hancox.

Below, Hancox outlines some of the immediate actions she suggests for anyone who is going through a divorce:

Ensure your divorce settlement makes provision for your child’s education costs, including tertiary education.
Make sure maintenance payments increase in line with inflation. Be cognisant of the fact that maintenance and visitation rights are treated separately. Understand your rights and responsibilities.
Consider if you need to change jobs to account for your change in income.
Update your will ASAP! You have three months to change your will, or the law will deem that it was your wish that your ex-spouse inherits.
Review your estate planning with your financial adviser and consider setting up a testamentary trust to ensure the assets you’re leaving to your children are properly managed.
Check what you and your ex-spouse have signed surety for in the past and ensure any sureties you may have signed are cancelled.

The cost of the divorce itself varies depending on the circumstances and services providers. Generally, uncontested divorces are much cheaper and can be wrapped up in a matter of weeks whereas the cost of a contested divorce increases exponentially. Mediation is also an option, where an objective third-party individual works with the spouses to temporarily set aside differences to come to a settlement agreement. Mediated and contested divorces can take years to resolve.

There may be the temptation to rush into a DIY divorce that seems cheaper and quicker, but this can be risky particularly if you’re not a legal expert. “What you put into your divorce agreement could be called into question when you get into divorce court, or worst-case scenario could be to your detriment in the long run,” explains Hancox. There’s also the risk of one partner being savvier than the other. “The divorce agreement could be drafted to the benefit of one and detriment of the other. You may not realise this until it’s too late, with ramifications that could end up costing you far more than if you’d had an attorney and financial adviser involved from the start,” says Hancox.

Aside from the direct costs involved in the divorce proceeding itself, there are other less obvious expenses that should be factored into your budget:

Setting up a new home and all the expenses that entails from internet installation to furniture, to deposits if you are renting and bond registration, rates and taxes and insurance if you are purchasing property.
Taking over your cell phone contracts and other services such as childcare which your spouse may have been paying for prior to the divorce.
Setting up your own medical aid and possibly moving your child across to your plan is costly, as the price of medical aid is much higher for a primary member than a dependant.
Think about family and/or trauma counselling as a very worthwhile option to pursue.

Hancox says she strongly advises having a trusted financial adviser walk the journey with you, “It’s so important to have an objective expert cut through the emotion and help you come up with a plan that feels doable. It’s also good to know you can rely on someone who really has your – and your children’s – wellbeing at heart.”