Women of today are more aware than ever that it is important to have control of their own financial affairs, regardless of whether they are single, married, divorced or widowed. Personal circumstances notwithstanding, the earlier an individual can take the financial reigns in their own life the better.
With August being Women’s Month, David Knott of Private Client Trust and Jeremy Burman of Private Client Financial offer advice around marriage – and divorce - for women who are wanting to ensure that their affairs are in order and that they have full knowledge of their families financial status.
Before the wedding bells ring
“To start at the very beginning, before you get married it is important to understand the form of one’s marriage. One can get married in community of property where all assets are jointly owned and of course both parties are liable for all debts incurred, both before and during the marriage; one can marry out of community of property with an ante nuptial contract where the assets held by either party remain his or her sole property and each party is responsible for any debt incurred; or one can marry in terms of the Matrimonial Property Act of 1984 where each party retains his or her property held prior to the marriage but the growth in value of the assets over the term of the marriage is shared in the proportions that each held at the commencement,” explains Knott, who cautions that the different marriage regimes are complex and the above is a very simplified version.
“Proper advice and consideration is needed before you tie the knot because you can’t easily change your marriage regime afterwards. Ante nuptial contracts can be tailored to suit the needs and financial status of both parties.”
During the married years
“The saying ‘A man is not a financial plan’ rings as true today as it ever did as taking a passive role in the family’s financial planning renders a woman extremely vulnerable. Being dependant on someone else for your financial wellbeing can easily lead to financial hardship through events such as divorce or the death or retrenchment of your partner,” warns Burman. “No-one knows when their circumstance in life may suddenly change and it is therefore essential to have a plan in place to remain self-sufficient throughout life’s upheavals.”
According to Burman, although in the current economic climate both partners may need to work outside the home in order to meet a family’s financial obligations, it is still the case in South Africa that more women than men take on the lion share of the unpaid labour involved in child and house care. In addition, where finances allow, some mothers may decide not to pursue their own career goals - either abandoning these completely or postponing these until their children are grown. Both circumstances can lead to women earning significantly less than their partner. In such cases, a financial agreement between the couple can assist in ensuring that both partners are financially protected thereby avoiding unnecessary hardship down the line.
“Such an agreement can take the form of a pooling of both partners’ incomes from which household expenses as well as family savings are covered and from which each partner ensures that their own monthly savings and retirement contribution goals are met. This also helps avoid the scenario of one partner financing all the big purchases e.g. house, cars, furniture etc. while the other pays all the running expenses and ends up with no physical assets in their name.”
Burman advises that where a decision has been made for one partner to stay home full-time it is worth considering the payment of an allowance to them by the other partner. “It is important that this allowance is not a stipend but a genuine compensation for time and skills involved in running the house, care-taking of children and providing the other partner with the background support for them to pursue their career with the financial rewards that this brings. This allowance should also be sufficient to allow a partner to meet their own personal savings and retirement contribution goals.”
Knott concurs and says that whether you work or not, you need to insist on open dialogue with your partner during the course of your marriage so that you are kept aware of the family’s financial footing, are involved in all important decision making, and know about any and all investments. “It is also vital that a Will is drawn up and that you know exactly what is stated in this Will, ensure that you are happy with the allocation of assets and that should your husband pass before you, you are suitably taken care of.”
In the event of divorce
“Unfortunately we have a very high rate of divorce and often the wife ends up the poorer party,” says Knott. “When the marriage sours, the best advice is to commit to paper the separation of assets, who is to have custody of any children, the amount of maintenance payable, both parties being responsible for children’s upkeep according to their means and any other important considerations.” Having a 3rd party facilitate this process is invaluable and it doesn’t need to be an expensive lawyer.
Knott cautions that without this general agreement, once the attorneys become involved in negotiations matters will quickly become messy and costs escalate. “The least costly divorces are those that are amicable.”
“And obviously, your Will should be reconsidered after divorce. The Wills Act of 1953 ignores a divorced spouse only for a three-month period after the divorce and the Will is read as if he died before the date of divorce. After that period the Act assumes that the intention was to still benefit the former spouse.”
Burman concludes by advising that whatever stage a woman is at in her life, it is worth consulting a wealth manager who can assist in setting up a plan to meet her short, medium and long-term savings goals, and to help her provide adequately for her retirement.
“Although this is best done at the start of a woman’s working life it is certainly better done late than never. Taking financial control of your own life, while initially a daunting prospect, is the first step to providing yourself with the security and protection for the future. From this strengthened position women can make better personal decisions unclouded by the fear of the financial implications as well as buffering themselves, and their loved ones, from the financial impact of those unexpected surprises that seem to inevitably occur at some point in life.”