What's mine is yours? Here's how divorce will affect you Financially
From expensive legal fees to the emotional damage suffered by all involved, divorce imposes costs of both the calculable and immeasurable kind.
According to research, in terms of purely financial losses post-divorce, women stand to lose up to 26% of their household income, and men 15%.
Explaining how divorcees arrive at these financial losses, Hein Gonzales, attorney and Director at HFG Attorneys, says much depends on the matrimonial property regime couples chose when they got married.
Types of matrimonial property regimes in South Africa
Gonzales says in South African law, there are three types: marriage in community of property, marriage out of community of property without the accrual, and marriage out of community of property with accrual.
Below, the attorney explains how each determines how assets and liabilities are treated during a divorce:
If married in community
Upon divorce, the whole estate will be divided in half, including assets and liabilities.
If married out of community without the accrual
Each spouse has separate estates and has no claim on the other party’s accrual or estate.
If married out of community of property, but with accrual
Each spouse has their own separate estate, but the accrual of both parties’ estate will be calculated at divorce, considering the terms of the pre-nuptial agreement, and thereafter, establish whose estate accrued more during the span of the marriage. The party whose estate had the smallest accrual has a claim against the other spouse’s accrual.
“Notwithstanding the above, the parties can decide to settle the division of marital assets on their own terms and conditions, which will be reduced to writing and made an order of court,” Gonzales advises.
Try to keep it short
The attorney says that agreeing on terms will go a long way in reducing the cost of divorce, adding that disagreements such as the division of estate or child and spousal maintenance will only extend the process meaning greater legal costs.
“One of the most common financial losses and the most expensive in a divorce is the legal cost, advocates fees and experts’ witnesses in the event of an extensive opposed divorce… My first advice to my clients is usually to attempt to amicably agree on the terms of a divorce with your spouse, whereafter this will be reduced to writing in the form of a settlement agreement and incorporated in the divorce order,” Gonzales notes.
What happens to retirement fund assets?
Gonzales says that the matrimonial property regime will dictate what you stand to lose when it comes to your retirement fund assets.
For those married in community of property, Gonzales says the non-member is entitled to half of the retirement fund of the member spouse from the date the divorce order is granted.
If married out of community of property without the accrual, the non-member spouse is not entitled to the member spouse’s retirement fund; however, a settlement agreement can be made.
“Parties can agree through a settlement agreement to share the retirement fund assets. This settlement agreement will be made an order of court through the divorce order,” Gonzales advises.
If married out of community of property with accrual, retirement fund assets will remain separate, but the value of the retirement fund does come into play.
“The financial value of the retirement fund benefit will be used to calculate the accrual, and the party with the smallest accrual will have a claim against the other party”.
How is debt split in a divorce?
Debt is another area that contributes to financial losses when a marriage comes to an end. Once again, the matrimonial property regime will determine who pays for what.
Gonzales says that if you’ve entered into the default matrimonial property regime, the term what’s mine is yours will be applicable.
“In terms of marriages in community of property, both spouses’ debt and liabilities will form part of the joint estate, irrespective if it was incurred before or during the marriage. Upon divorce, and in the absence of a settlement agreement, the assets and debts will be split 50/50 between the parties,” he explains.
For couples married out of community of property without the accrual, debt does not come into play. “Therefore, the one spouse will not be liable for the debt of another upon divorce,” the attorney notes.
“Lastly, in marriages out of community with inclusion of the accrual, debts prior to the marriage will not be included in the accrual calculation, but debt that they incurred since the date of marriage will be taken into account when calculating the accrual unless expressly excluded in the antenuptial,” Gonzales says.
A note on spousal maintenance
Gonzales says that the South African divorce system leans toward a “clean break” approach in terms of spousal maintenance.
“Our divorce systems favour that there must be a “clean break” between the parties after divorce, which requires that each party must become financially independent of the other spouse,” Gonzales notes.
A court may or may not award spousal maintenance, or couples can negotiate through a settlement agreement, Gonzales advises.
'The biggest losers'
Beyond monetary losses, Gonzales says that in his experience, it’s often a couple’s children who become “the biggest ‘losers’ in the divorce process,” mainly when parents use their children as leverage.
“What these parents fail to understand is the horrendous emotional and psychological impact this has on the kids, which is not in their best interest. When parents take decisions which has an impact on the minor children, the best interest of the minor children are of paramount importance”.
Financially or otherwise, how did divorce affect you and your family?