Tips on drafting a divorce order

Last week, ‘team Jolie’ fans were devastated by the news that one of Hollywood’s favourite couples, Angelina Jolie and Brad Pitt, announced they were calling it quits after just two years of marriage and more than ten years of being in a relationship with each other. Reports stated that Jolie filed for divorce in a Los Angeles court on 19 September 2016 citing irreconcilable differences and has also requested primary physical custody of the couples’ six children.

Divorce is a reality that many face but unlike Brangelina, who are both well off, addressing the financial side of divorce is vital for most couples because separating can be an expensive business.

Clive Hill, legal adviser at Sanlam Trust said: “While dealing with the emotions of divorce, couples often overlook crucial aspects of the settlement agreement – which if handled correctly, can prevent needless hardship down the line.”

He offers the following tips for those, particularly women, going through a divorce:

  1. Including security for spousal maintenance (if applicable) in the divorce order. In the event of the ex-spouse dying, his minor children will be able to claim for maintenance against the deceased estate, but his ex-wife will not. This can be addressed by stipulating in the settlement agreement to be made an order of court that spousal maintenance obligations will be binding on the deceased estate. A lump sum, based on life expectancy, can then be paid out to the ex-spouse from the estate.
  2. Specifying that benefits in the divorce order be inflation-linked. This not only concerns maintenance, but medical and education costs. Medical contribution increases are usually much higher than the consumer price index (CPI), as is the cost of private schooling. A more sophisticated approach to annual escalation rates than CPI is needed when calculating these benefits – one needs to look at actual costs.
  3. Wording the divorce order to give access to an ex-spouse’s retirement savings. Pension funds can’t enforce divorce orders which don’t adhere strictly to legal requirements. They must be worded in a very specific way. The order must specify that that the ex-spouse is entitled to a ‘pension interest’, and state the exact share of the interest. The identification of the pension fund in question must also be precise.
  4. Ensuring any benefits accruing from life or endowment policies are accurately described. The names of the particular policies and insurance companies must be included. However, it is not enough to include details of a change of beneficiary only in the divorce order. If an ex-spouse is to be the new beneficiary, then the intended beneficiary nomination also has to be lodged with the insurance company in question for it to be valid.
  5. Undertaking a thorough valuation of all assets. Hill says this is becoming a specialist area, particularly in the high net worth market. It is crucial to ensure accurate valuations are done, and it is therefore advisable to appoint a professional appraiser. It is not necessarily a good idea to convert all assets to cash. It may be prudent to transfer the assets themselves to the ex-spouse instead of liquidating them. For instance, it may not be the best time in the market to sell the family house, or to sell shares in a rising stock market.
  6. Conducting a detailed investigation of business assets. Business assets are often challenging to liquidate, since the business owner may not be able to dispose of assets without the consent of co-shareholders and without affecting his income-earning capacity. The divorce attorney should thoroughly examine all assets, perhaps securing expert assistance. Looks may be deceiving – the business owner may look wealthy but his venture may have huge debts of which his spouse is unaware.
  7. Ensure that all assets and benefits are transferred without delay. If her former spouse dies before transfer has taken place, an ex-wife may find herself at the end of a long list of claimants to the deceased estate. No matter what the divorce order states, creditors are also entitled to their share. This also applies if the ex-spouse is still alive and gets into financial trouble – creditors can attach assets which were supposed to have been transferred to the ex-wife.
  8. Establishing a guardian trust. Often parents nominate minor children as beneficiaries of assets such as insurance policy pay-outs, property and other investment proceeds. Such proceeds are often paid out to legal guardians to manage on behalf of the children. Since the surviving parent automatically becomes the minor child’s legal guardian, irrespective of your divorce or custody agreement, you may end up with an undesirable situation where your ex-spouse receives the benefits on behalf of your children.
  9. Employing a qualified financial adviser as well as an attorney. It should be clear that drafting a divorce order can be a complex matter. Hill noted it is essential that each party has their own financial adviser and attorney. Having two specialists who can together come up with solutions for the best possible divorce settlement agreement is invaluable.