Photo: Getty images While divorce is seen primarily as a legal and emotional process, it is also one of the most significant financial events a person can experience. Beyond the immediate changes to living arrangements and family dynamics, divorce can have a lasting effect on wealth, retirement savings, investments and long-term financial security.
What is your marital regime?
This might seem like a complex question, but it’s actually simple. Your marital regime is the legal terms regarding your property and assets, under which you entered into marriage.
One of the key factors influencing the financial outcome of a divorce is the matrimonial property regime under which a couple is married. In South Africa, the marital regime determines how assets and liabilities are treated when a marriage ends. Whether a couple is married in community of property, out of community of property with accrual, or out of community of property without accrual can significantly affect how assets are divided between spouses.
A common misconception is that divorce involves simply splitting assets. In reality, the process requires a comprehensive assessment of both assets and liabilities. Property, investments, retirement savings, business interests and debt may all need to be considered when determining a fair distribution of a couple’s estate.
Retirement savings in the context of divorce
Retirement savings are often among the most valuable assets accumulated during a marriage. As a result, understanding how retirement fund benefits are treated during divorce is essential. Pension interest may form part of the divorce settlement, and the wording of a divorce order can play an important role in ensuring that benefits are paid correctly and without unnecessary delays. The introduction of South Africa’s two-pot retirement system has added another layer of complexity, making it even more important for individuals to understand how retirement assets may be affected.
Marriage (and divorce) across borders
For individuals with assets in multiple countries, or those who are married to a foreign national, divorce can be tricky. Different legal systems may apply, and the rules governing the division of assets may vary depending on the circumstances. In these situations, specialist legal advice is often necessary to ensure that financial interests are adequately protected.
While much attention is typically given to the immediate financial settlement, it is equally important to consider the longer-term implications of divorce. Changes to income, expenses, insurance needs, beneficiary nominations, estate planning arrangements and retirement goals can all affect future financial wellbeing. Reviewing these areas as part of the divorce process can help individuals establish a solid foundation for the next phase of their lives.
Be financially savvy – during your divorce and beyond
Divorce is not only about dividing assets. It is also about understanding how financial decisions made today may affect your future financial security. Taking a holistic view can help individuals navigate this transition with greater confidence and clarity.
Divorce can be financially complex, and understanding the key considerations is critical. Seek appropriate professional guidance – from an attorney as well as a financial intermediary. This will help make informed decisions and work towards a fair and sustainable financial outcome.
Esta Theron is a Certified Financial Planner® and a champion of enabling clients to understand the financial implications of divorce. She sees this as an important step in making informed decisions and planning for the future. DM
Author: Esta Theron, Business Development Manager, Glacier by Sanlam
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