Unfortunately divorce is an all too common reality in our current times. Statistics reflect that as the year winds down to a close, partners contemplate the reality of dissolving a union that is no longer working.
Most people going through a divorce will agree that the initial stages can be overwhelming – in fact the changes happen so quickly that the alternative – to stick their head in the sand and hide, may well seem a more attractive option.
As with most daunting undertakings, a plan and a checklist will assist. There are a few essential steps that need to be taken in contemplation of divorce proceedings to ensure that the financial settlement will be fair and you will be financially independent and secure once the divorce is finalised.
This is according to Lisa Griffiths, Associate Director of BDO Wealth Advisers, who highlights the following list of “to-do’s” to prepare for divorce:
1. Establish a team of professional advisers
“Firstly, it is essential that you find your own lawyer and that it should not be a person who has or will act for your spouse.”
“Also ensure that you have your own financial planner – their role will be critical in analysing the financial data. Once again, your planner should not be a person who will also act for your spouse – there is a clear conflict of interest!”
2. Gather all of your financial information and documentation
“You need to be fully aware of the complete and complex financial situation facing you. Understand all of your debts — not only what the two of you have jointly, but also individually. To avoid any unforeseen surprises, you need to comprehend the full picture on credit card accounts, home loans, car finance and even other items such as personal loans, business debts and retail accounts. You must be prepared to disclose your full financial status.”
“Be prepared. It is so much easier to navigate divorce negotiations if you have the full financial information available early on in the proceedings,” says Griffiths, who goes on to advise that one should also keep a second set of documentation in a safe place.
3. Establish your own financial identity
“Start by conducting a credit check on yourself. Subsequently, open your own accounts that are solely in your name. This includes cheque, credit cards, savings, retirement plans, and even things like insurance. You should rout all of your deposits and salary payments through this account.”
4. Renegotiate bond repayments and/or rental agreements
Griffiths advises that if you have purchased a home together or are jointly on the lease of your current residence, you need to carefully consider your options when you prepare for divorce. The bank that holds the home loan or the landlord that owns the property will expect the payments to be made regardless of your personal situation.
“Whilst you may want to move out and on as soon as you can, doing so may hurt your claim to the property. For those who share the bond or rental payments, you are jointly responsible for this financial commitment. In some cases, the two spouses can come to an arrangement about who keeps the house and what concessions are to be made. However, often the sale of the jointly held home is a cleaner process.”
5. Change your Will
“Many couples have a joint Will. If this is your situation, you need to draft a new Will drafted in your own name,” cautions Griffiths. “If you already have your own Will then ensure that it is adjusted based on the divorce settlement agreement. You need to discuss and consider various issues such as who would be the executor of the estate or, if you have children, how children from your current marriage may be treated when compared with possible children or stepchildren from a future marriage.”
Griffiths states that reviewing your estate plan, no matter how small, is essential and will help to avoid any grey areas in the future — some of which may take years to surface and more years to resolve – if ever.
6. Child maintenance
“If you have children, child support will absolutely be an issue when you financially prepare for divorce. As parents you should (hopefully) be able to amicably come to an agreement that is equitable to the children and that does not affect their accustomed needs. If you won’t have primary custody of the children, accept that you will be paying some form of child maintenance. How much you pay is up to you and your spouse — and your financial situation. The court holds the view that the children’s needs come first and if you and your spouse cannot find a common ground, you will be at the mercy of the court imposed decision, based on the information presented by your attorneys.”
7. Be vigilant
Griffiths cautions that in preparing for divorce it is not unheard of for a spouse to act in an unethical way and so you must be vigilant and watch for any unusual expenditure by your spouse and also pay attention to any unusual paperwork in respect of any of your assets.
“When it comes to financial planning for divorce, following the above advice can save both you and your spouse a lot of financial and emotional pain. It will also make it so much easier to establish your own life after the divorce,” concludes Griffiths.