No one weds while expecting failure. Yet up-to-date information underlines that as many as 50% of marriages end in divorce.
Complicated and contested divorces can take years to conclude and during the course of these proceedings errors are often made that will negatively impact your overall financial well-being.
Subsequent to her recent article ‘Preparing for divorce – Ensuring you are independently financially secure’, Lisa Griffiths of BDO Wealth Advisers, South Africa, highlights some of the more common mistakes and how they can be avoided.
Retaining the family home
“Retaining the family home is often an emotional decision – especially for women. Divorcing couples frequently engage in bitter conflicts over the primary family home,” states Griffiths, who advises that before fighting so hard for this house, one should consider the high costs of owning property – both from a time and money perspective. “Factor in repayments, maintenance, rates and taxes, insurance etc.”
“Financial assets may well outperform property returns and essential financial resources, such as pension funds, are frequently passed up in favour of bricks and mortar.
Downsizing is often the better choice to ensure that one’s income is not stretched to the point where you cannot make provision for retirement.”
“When dividing assets in a divorce, do not accept asset valuations at face value but rather test any financial calculations – especially those concerning accruals. Similarly, obtain your own independent valuations of fixed properties, motor vehicles etc.”
Downsizing is often the better choice to ensure that one’s income is not stretched to the point where you cannot make provision for retirement
Should your divorce negotiations take time, ensure that you update asset values. “It is not uncommon for divorce proceedings to stretch over a few years,” cautions Griffiths, “during which time asset values can vary enormously. Get assistance from your financial advisor to do the maths and re-evaluate before settling.”
Do not delay the agreement needlessly
Griffiths warns that the emotional exhaustion and psychological strain of going through a divorce can be so great that a spouse mentally checks out from the process.
“This is damaging in that the momentum is lost and negotiations never seem to be taken up from the point at which they were left off, but revert to an earlier juncture.”
“Another problem is that until finality is reached additional demands can be made. Further complications follow and of course, further legal fees will follow too. Keep in mind that assets are calculated at the date of the settlement and not at the date of the break-up of the marriage.”
Griffiths advises that it is essential, particularly in an acrimonious divorce, to change all account passwords as soon as possible. “Your email, social media, and financial account passwords should all be changed. When you choose a new password, make sure it has no link to your life together. No family names, birthdays, pet names, or other information of which your ex would have knowledge.”
Limit access to joint accounts
“Review all of your accounts and take note of which are joint accounts. In some cases, you won’t be able to close these accounts until reaching a divorce settlement.” Griffiths recommends that you can contact those institutions where you have joint accounts and notify them of the situation. “They may be able to control access to these accounts and thereby prevent you or your spouse from depleting them.”
Do not get trivial
Griffiths concludes with important advice. “Do not get petty. Set a high moral tone and don’t drag the kids, pets, furniture and bric-a-brac into the negotiations.”
“Enlist the help of your financial advisor/wealth planner to navigate your way through property ownership calculations, asset valuations and account reviews in order to protect your financial interest during a divorce.”