Reduce the cost of divorce
All may be fair in love and war but divorce is a war that’s usually never fair on your pocket says Nicolette Dirk.
Ivana Trump famously coined the post-divorce phrase, ‘don’t get mad, get everything’. But if your ex is not Donald Trump, chances are you’ll need a 30% increase in income to maintain the same standard of living you had while married. According to marriage researchers, Drs. Linda J. Waite and Maggie Gallagher this is because the process of divorce is expensive and income that used to support one household is split. Besides the obvious costs of a good lawyer, what are some of the other financial costs to consider when love is not enough?
It’s all about the money
After a divorce you need to anticipate a lower standard of living. According to Old Mutual’s senior legal manager, Sore Cloete, this is because married couples maintain one household but after a divorce, two households need to be maintained. Both parties now pay for costs such as electricity, insurance, food and transport whereas before the costs were shared.
The downside to marrying in community of property
According to Cloete, couples married in community of property have a joint estate and should one of the partners enter a business venture with negative consequences, the other partner may also be affected as the joint estate could be used to pay the debt.
Also should one spouse die, the joint estate is ‘frozen’. “The surviving partner would not be able to deal with the ‘frozen’ joint assets until the joint estate administration has been finalised. For this reason couples married in community of property should have separate bank accounts,” says Cloete.
Debt expert Luke Hirst from DebtBusters warns that in community of property it is not only assets that are split, but debt as well. Usually in South African divorces, debt plays a bigger role because people generally don’t have so many assets.
Financial drawbacks to marrying out of community of property
Couples married out of community of property have two separate estates, where they do not have any influence on the other party’s spending. But one partner could deplete his/her estate completely and become dependent on the ‘non-spending’ partner.
According to South African law you can claim support from your former spouse to provide your child with necessities like food, clothing, housing and education. The court can order the father to contribute to the payment of lying-in expenses (the mother’s expenses immediately before, during and immediately after the birth) and maintenance from the date of the child’s birth up to the date on which the maintenance order is granted. The court may also grant an order for the payment of medical expenses, or may order that the child be registered on the medical scheme of one parent as a dependant.
Claiming your ex’s pension fund
According to Cloete, couples married in community of property and out of community (with accrual) may claim for each other’s pension fund’s upon divorce as the pension savings form part of the ‘joint’ estate, which can be shared at divorce.
Couples married out of community of property, without accrual, may not claim from each other’s pension funds upon divorce. How much a spouse can claim also depends on the divorce order as the spouse claims against the pension fund’s value at time of divorce. “The date of the divorce order determines whether tax is payable when benefits from a pension fund is paid to a non-member spouse. If the divorce order was granted prior to 13 September 2007, the payment to the non-member will be tax-free irrespective of the date of payment to the non-member spouse. If the divorce order was granted after 13 September 2007, the non-member spouse will be responsible for the tax and such tax calculated based on the withdrawal tables,” says Cloete.
According to Hirst, when you get access to your ex’s pension you should get a financial advisor to advise you on how to spend it effectively. “When you draw your ex’s pension as a lump sum you should take into account how much you should budget for your retirement. Some people will put all their money into a home loan or some will invest it. If you opt to draw a monthly pension you should also consider whether that amount can sustain you in your retirement,” says Hirst.
Should you pay or stay?
Consider whether you are divorcing for the right reasons, says Hirst. Many people choose to get divorced for financial reasons. One spouse, who is a spendthrift, may cause the other to see divorce as a better option but Hirst warns that divorce usually leaves both parties poorer than if they stayed together.
It also pays to ‘play nice’ with your ex. According to Hirst discussing the terms of divorce with your ex, using a mediator, is a lot less costly than each party going to war, armed with an expensive lawyer.
Help is at hand
Divorce doesn’t have to be costly though. According to divorcesouthafrica.co.za an uncontested divorce can cost you R1 950 if you use their services. Alternatively you can paythem in R500 instalments.
If you don’t want to hire a lawyer you can contact the South African Association of Mediators by email: firstname.lastname@example.org or fax them at 086 719 1811.
For those who can’t afford it, there are legal clinics at the University of the Western Cape’s (UWC) and the University of Cape Town (UCT). Legal Aid South Africa also provides affordable legal advice to low income earners. You can call UWC on 021 959 2756, UCT on 021 650 3775 or contact Legal Aid South Africa on 0800 110 110.
Even if you opt for a lawyer, being amicable about the terms of your divorce with your ex speeds up the process. This saves you the high costs of representation needed for back-and-forth legal arguments.