How protect your money in a divorce

By Staff Writer
By Angelique Ruzicka, editor, Justmoney

The 1-7 of September is Marriage Week, however while we celebrate it some dismal stats have come out from the Justice Department on the number of divorces the nation goes through on a yearly basis. 
While tens of thousands of people get married every year there are an equal if not bigger number that get divorced. The 2012-13 annual report from the Justice Department has shown that the divorce rate has rocketed by 28% from 39 573 to 50 517 cases.  
Divorce is a harsh reality some couples have to deal with. Not only can it be an emotional drain but it can be a financial burden too. Clive Hill, legal adviser at Sanlam Trust, says it’s often women that suffer the most financially in a split: “While dealing with the emotions of divorce, women often overlook crucial aspects of the settlement agreement – which if handled correctly, can prevent needless hardship down the line.” 
Hill says both divorce parties, but women in particular, need to consider the following:
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 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,” explains Hill. 
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. This is becoming a specialist area particularly when a divorce is conducted between well off partners. Hill explains that people do tend to try and hide assets as they think they can get away with it. “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 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,” says Hill. 
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. Ensuring 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,” says Hill. 
8. 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 says 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.

While professionals are vital if you need advice, Hill also admits that a divorce can be conducted without attorneys, provided it’s a straight forward case and both parties are open and honest. Cutting divorce attorneys out can save couples a heap of money as lawyers can charge as much as R3, 000 an hour and divorces can cost around R25,000 to conclude. 
“It’s well known that lawyers drive up fees,” warns Hill. “It’s possible to do a divorce without a lawyer. The judge has to take special care of you if you don’t have a lawyer but the courts will always suggest that you have one to ensure that you understand your rights and will have no grounds for appeal.”

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