Mar 18, 2020
How to set yourself up for independent financial security.
Your matrimonial property regime forms the basis of how your assets will be divided in the event of divorce. However, once your divorce has been finalised by the courts, you will need to unpick what was once your merged finances and set yourself up for independent financial security. In the process, it is likely you will need to consider:
A new budget
Once your divorce has been finalised, you will have a clearer picture of your income including any maintenance income payable by your ex-spouse. This is an appropriate time to draw up a post-divorce budget so that you can set up the financial mechanics of your new life. Your budget will give you guidance as to how much you can afford to spend on accommodation, groceries, vehicles, domestic help and insurances, so be as thorough and realistic as possible in detailing your budget.
The marital home
If you were awarded the marital home as part of the divorce order, you will need to ensure that the property is transferred into your name. Bear in mind that in these circumstances, the Transfer Duty Act exempts you from paying transfer duty. As the sole owner of the property, you will need to change your municipal accounts and related to your name.
During separation and before the divorce is finalised, many couples give little thought to their short-term insurance. Once your divorce is finalised and the division of assets has taken place, it is advisable for each party to take out a separate insurance policy to cover their short-term insurance needs. Keeping a single insurance policy for your respective belongings can lead to complications, arguments and the risk of underinsurance. The divorce settlement should provide clarity on which party owns what, and this can form the basis of setting out a new insurance policy for each person. Rather than amend an old policy, this is an opportune time to review your short-term insurance, rework your inventory of assets, and look for more cost-effective options.
Being divorced from your partner, your priorities in respect to providing for him/her in the event of your death are likely to have changed. While married, your quantum of life cover will have been calculated by taking into account the extent to which you wanted to provide financially for your partner if you passed away. Your assets and liabilities would also have been taken into account when calculating your life cover needs. After your divorce, the value of your assets and liabilities are likely to change and you will not want to provide financially for your ex-spouse should something happen to you. This is, therefore, the perfect opportunity to reassess your life cover to ensure you are not over-insured and paying for cover you no longer need. If you have maintenance obligations towards your children, bear in mind that you may want to put sufficient life cover in place so that you can honour these obligations in the event of your death or disability.
While you are reassessing your life cover, take time to review the beneficiaries that you have nominated on your various policies and investments, including any retirement funds that you have in place. If you and your ex-spouse had life policies in place, it is likely that you had nominated each other as the beneficiaries on your policies. Once you have adjusted the level of your life cover, ensure that the proceeds of the policy will be paid to the correct person/people should you die. If you do not nominate any beneficiary on your life policy, the proceeds will be paid directly into your estate and will be wound up as part of your estate. Remember that, while you can nominate beneficiaries on your retirement fund, the allocation of your retirement fund interest is at the discretion of the fund trustees. When determining who will receive these benefits, the trustees will take into account those people who are financially dependent on you including your children, aged parents and/or live-in partner.
The terms of your divorce order will also specify who is responsible for any debt that you and your ex-spouse had. Be sure to make a list of all the debt you are responsible for paying and ensure that the service provider has your correct contact details. Don’t forget to account for these repayments in your budgeting process and, if necessary, put a debt reduction plan in place to help manage the repayments.
If your cellphone is registered in the name of your ex-spouse, you may want to move the account into your name to ensure that you are able to transact independently going forward. If your account is registered in your ex’s name, you may need his/her permission when upgrading or doing a SIM swap, so rather ensure that the account is moved into your own name.
Set up new debit orders
The terms of your divorce order will set out who is responsible for the payment of expenses such as school fees, medical aid premiums, tutors and other ongoing services. Use this opportunity to set up your debit orders correctly and update your beneficiary details on your online banking portal.
Separate joint bank accounts
If you and your ex-spouse had any joint bank accounts and/or credit cards, you will no doubt want to separate these accounts accordingly. If you and your ex shared login credentials, don’t forget to reset your username and passwords as further protection. The same applies to any joint retail accounts you may have held together.
Depending on the terms of the divorce order, you may need to move off your ex-spouse’s medical aid and register as the principal member of your medical aid. This may be a good time to completely reassess your healthcare needs in terms of your own health status, chronic conditions, affordability and accessibility to networks. Your post-divorce budget may be tight but resist the temptation of coming off your medical aid. Most medical schemes offer affordable network options that will at least provide you with basic hospital cover, ensuring that your membership is uninterrupted and you will not be penalised later on in life. If you and your ex-spouse had a gap cover policy, you may need to come off his/her policy and take out a policy in your name. Once again, try to avoid an interruption in membership as this can result in waiting periods being imposed if and when you want to join later on.
Domestic worker contracts
If you are retaining the services of your domestic worker and/or gardener, remember to change the signatories to the contract depending on who is responsible for paying their salary or wages. With changes to your living arrangements, your domestic worker may need to travel further to get to work or work longer hours to assist with child-minding, so be sure to adjust his/her salary accordingly. Your changed circumstances may impact on his/her travel costs and childcare arrangements, so be sure to have these discussions with your employees.
One of the most important documents you will need to update after your divorce is your will. Section 2B of the Wills Act provides divorcees with a three-month grace period in which to amend their wills following a divorce. In essence, this means that if you die within three months of the date of your divorce and your ex-spouse is a nominated beneficiary, your assets will be distributed as if your ex-spouse had predeceased you. After the three-month period, if you have not amended your will, the courts will assume that you intended your ex-spouse to inherit from your estate.
Other legacy documents
If you have a living will in place which was kept by your ex-spouse, you may want to consider updating this document and giving it to a close friend or family member for safekeeping. Similarly, if your ex-spouse had access to the login credentials and PIN numbers for your digital world – including retail accounts, social media accounts and online subscriptions – you may want to consider updating these details and giving them to a friend or family member for safe-keeping.
Whatever other expenses and bills you are responsible for paying in terms of the divorce order, be sure to communicate your changed status with each service provider, including any change in your residential address or contact details. This includes services providers such as your GP, vet, dentist, garden services and optometrist.
Over the years of your marriage, you will probably have built up a joint filing system for all accounts, legal documents, school reports, invoices and bank statements. Separating the documents between you and your ex-spouse might be a difficult task, and it may make sense to make copies and/or scan the filing system so that you each have access to the documentation. You will both always require access to legal documentation such as birth and marriage certificates, identity documents and passports, academic records, marriage and divorce certificates, title deeds, lease agreements, and so on, so it makes sense to give each party access.
Following the redistribution of assets in terms of your divorce order, you may receive a lump sum or severe instalments from your ex-spouse. Before making decisions with these funds, be sure to seek financial and tax advice so that you fully understand the implications of your choices. To protect your future, appropriately structured reinvestment of this money is of great importance. You will want to reinvest your capital in the most tax-efficient manner to ensure that it can achieve adequate investment growth over your specific timeline.
If you were awarded a portion of your ex-spouse’s retirement fund interest, you can elect to either withdraw the funds or transfer the funds into a retirement or preservation fund of your own. Bear in mind that any withdrawals will be taxed whereas a transfer to another approved fund will take place tax-free. Being solely responsible for your retirement funding is a huge undertaking, so be sure to get independent financial advice before making any withdrawals. In general, a divorce sets both parties back financially and it is of the utmost importance to start planning for your financial future as soon as possible after the divorce.
Change your marital status
It is important to ensure that the change in your marital status is registered with Home Affairs as this may impact on your ability to marry in the future. If your status remains recorded as ‘married’ on the system, you may have difficulties later on in life if you want to remarry. It usually takes around three months to register this change.
Change your surname
If you took your husband’s surname when you got married and it is reflected as such in your ID book, you can apply through Home Affairs to revert to your maiden name.
Develop your own financial plan
The most important step you can take to fortify your finances after a divorce is to develop a financial plan. Divorces are expensive and it is likely that you have been set back financially. Before making any major financial decisions such as buying property, travelling overseas or reinvesting capital, be sure to partner with a trusted adviser who can map a financial plan for your independent future.
Source: MoneyWeb (emphasis by SDLAW*)
*SDLaw, otherwise known as Simon Dippenaar & Associates Inc., is a law firm of Cape Town lawyers, and specialist Divorce Attorneys. Contact us for legal advice or representation with the divorce process at email@example.com or +27 (0) 86 099 5146.