Financial uncoupling after divorce

In the emotional aftermath of divorce, don’t neglect some important practical tasks

Divorce is an emotional journey, but it’s also a practical and financial one. Couples often delay making the break because the prospect of “unmerging their money” is just too daunting. Marriage tends to be a more financially stable regime than singledom, especially if there are children involved. One household costs less to maintain than two. But don’t let that be the reason you stay in a relationship that is no longer healthy for you, your partner, or your children. Make a plan, and approach your financial uncoupling systematically. It’s much less traumatic than the emotional split. Here’s how.

Matrimonial property regime

Firstly, what is your matrimonial property regime? This determines how your assets will be divided. If you married out of community of property without accrual, you can each go your merry way. Your assets are your own. However, you may still have a shared property and other assets in common. Whatever your matrimonial regime, the big-ticket items will be part of your divorce settlement. Your task now is actually to unpick your previously merged finances and set up your new, financially independent life.

A new budget

The first thing you will need is a budget. With the divorce finalised, you should know what your income is plus – or minus – any maintenance you are due to receive from or pay to your ex-spouse. You will also inevitably have a different set of outgoings, if you have moved house or divided expenses like school fees. Draw up a new budget so you can realistically assess your available resources for accommodation, groceries, vehicles, domestic help, insurance, etc. Include as much detail as possible. If you buy a cappuccino on your way to work every morning, write it down. Don’t view it as a sundry expense, as these small outlays add up over time if they are regular.

The marital home

If you have retained occupancy of the marital home as part of the divorce settlement, make sure you transfer the property into your name. The Transfer Duty Act exempts you from paying transfer duty. You will also need to change your municipal accounts into your name if they were in your spouse’s or your joint names. Some municipalities will require a deposit for this. Also make sure your home insurance is in your name. You don’t want to have to claim for a burst geyser, only to discover that your ex-spouse has to submit the claim for you.

Short-term insurance

And on the topic of insurance, don’t overlook your contents insurance. It makes no sense to keep all your belongings on one single insurance policy, and could lead to future animosity if you acquire a high-value item that you want to itemise on your policy. Do you really want your ex to know about your purchases? Short-term insurance is highly competitive, and it’s a good idea, regardless of the state of one’s marriage, to review options from time to time. Switching insurers can save you money. Your divorce settlement is an opportunity to review your inventory of belongings and seek out a more cost-effective policy. A different insurer may be more appropriate purely because of the difference in items needing cover post-divorce.

Life cover

Once you are divorced, unless it is a condition of the divorce settlement, you are unlikely to want your ex-spouse to be the beneficiary of your life insurance on your death. Your assets and liabilities would also have been a factor in calculating your life cover needs. Now, the value of your assets and liabilities will be different. If you have children, both you and your ex should ensure you have adequate life cover to meet the needs of your children, should you die or become disabled before they reach majority. For all these reasons, it’s important to reassess your life cover and its beneficiaries. If you don’t name a beneficiary on your life cover, the proceeds will be paid into your estate when you die.

Beneficiary nominations

At the same time, review the beneficiaries you have nominated on other policies and investments, including any retirement funds you have. When it comes to your retirement fund, you can nominate beneficiaries, but the allocation of your retirement fund interest is at the discretion of the fund trustees. They will take into account anyone financially dependent on you, including children, aged parents and/or a live-in partner.

Debt and bills

Hopefully, you took our advice and didn’t acquire masses of debt in the run-up to your divorce. The terms of the divorce order will specify who is responsible for any debt held by you and your ex-spouse. Make a list of the debt you are responsible for paying and include these repayments in your budget. Notify the lenders of your new contact details.

Also let service providers know your new status and contact details for other bills you are responsible for. This might include your GP, vet, dentist, garden service and optometrist, for example.

Cellphones

If you had a single cellphone plan for both of your devices, move your account into your own name. You don’t want your ex having access to your cellphone records, and you don’t want to have to ask permission to upgrade or do a SIM swap, which may be necessary if the account is in their name.

Bank account and debit orders

If you and your ex-spouse had a joint bank account and/or credit cards, separate these accounts promptly. Unmerge any other credit accounts you had, such as Woolworth’s or other retailer. Change your login details and passwords for any joint accounts or sites you might have logged into as one in the past. Hopefully you did that already as part of your divorce plan.

It is likely that regular expenses like school fees and medical aid premiums will have been re-allocated as part of the divorce. Check your debit orders, ensure they reflect your current situation and update beneficiary details on your online banking portal if necessary. If you have changed your bank, you may have done this already, or you may have had to wait for the decree absolute to be sure of who would be responsible for which expense.

Medical aid

If you are on your ex-spouse’s medical aid, and the divorce order does not mandate that to continue, you will need to register as the principal member of a medical aid in your own right. Conversely, if you are the principal member and your spouse is coming off your plan, ensure your account is brought up to date with your medical aid provider. In both cases, it’s a chance to review healthcare needs in terms of health status, chronic conditions, affordability and accessibility to networks. If you have moved to a new location, you may be nearer or further from a network hospital and your current plan may not be the most appropriate. It’s not advisable to make medical cover an optional extra in the face of a tight budget. At the very least, ensure you have basic hospital cover. This will protect you in case of an unforeseen event and ensure your membership is uninterrupted. This can become important later in life. If you and your ex-spouse had joint gap cover, take out a policy in your name. Avoid an interruption in membership or you may be subject to a waiting period if you want to rejoin later on.

Your will

If you read these pages regularly, you will know that we are strong advocates for having an up-to-date will. Divorce is a key life event that requires you to review your will. Section 2B of the Wills Act allows you a three-month grace period in which to amend your will following divorce. 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. However, three months goes by very quickly. After three months, if you have not amended your will, the courts will assume that you wanted your ex-spouse to inherit from you. So don’t put this task off.

Filing

Access to documents may be the last thing on your mind, but there are records you may both still need access to, especially if you have children. You may each at some point need children’s birth certificates in your possession, for example when travelling with them. Make copies or scans of any important documents, including invoices and receipts for items bought jointly that you might need for income tax or other purposes. For travel you will need original passports and birth certificates. These should be kept by the parent with primary residence. Agree on a filing system for important records that you can both access and how you will do that. If your relationship with your ex is problematic, make sure you have your own copies of everything you are likely to need. It’s a chore to scan reams of paperwork, but you will be glad you did.

Financial planning

Take professional financial advice regarding retirement planning and saving/investing. If your settlement included a lump sum, for example, to buy out your half of the marital home, ensure you understand your options and invest in a tax-efficient manner. It’s also important to assess your own attitude to risk and choose investment vehicles that align to your risk tolerance and time frame. As you are making a major life change, it’s a good time to give serious consideration to your long-term objectives and structure your finances to support them.

If you were awarded a portion of your ex-spouse’s pension interest, you can either withdraw the funds or transfer them into your own retirement fund. Any withdrawals will be taxed, unlike a transfer to another approved fund, which is tax-free. As with your other investments, independent financial advice is essential. Most couples who divorce experience a financial setback as individuals post-divorce, so financial planning should be a priority.

Change your marital status

It may be the first thing you did on receiving your decree absolute but, if not, change your marital status at Home Affairs. If you forget, you may find you have a problem if you ever want to remarry. It takes about three months to register this change, and that could impact on future wedding plans!

Change your surname

Women: if you took your husband’s surname when you got married and it is in your ID documentation, you can revert to your own name. You must apply through Home Affairs. Also remember to tell your bank, your child’s school, your doctor, etc. We’ve known of women who have put a small ad in a local newspaper saying, “I, [first name, married name], now wish to be known as [first name, maiden name]. As newspapers are less popular than they used to be, you could put an announcement on social media. This is fine for your social contacts, but you should still notify service providers directly.

Contact Divorce Attorney Cape Town for more information

If you’re reading this, you may already be divorced. If you are not yet at that stage, and are weighing up your options, SD Law, family lawyers in Cape Town and Johannesburg, can help. We have extensive experience of helping couples divorce with dignity. Contact family lawyer Simon Dippenaar on 086 099 5146 or email sdippenaar@sdlaw.co.za.

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