Personal-Finance

The hidden cost of divorce

2020-03-17 13:07

Not all love stories have a happy ending. In fact, Stats SA has found that four in 10 couples get divorced before they reach their tenth wedding anniversary.

It has been reported that divorces are on the increase, with more woman (51%) plaintiffs prompting proceedings, and 55.6% of divorces have children who are younger than 18 involved. With children especially, a divorce can get complicated and – in general – even uncontested divorces can take a huge financial toll.

If you’re facing the prospect of a divorce, it can be a difficult, emotionally taxing time, but remember, you’re far more resilient than you realise, even though it may not feel that way. Sometimes there’s the temptation to rush into a “quickie” DIY divorce that seems cheap and fast – perhaps because you want to get out of the emotionally stressful situation as quickly as possible – but this can be risky. This is particularly true if you’re not a legal expert, because what you put into your divorce agreement could be called into question when you get to the divorce court.

For example, when I got divorced, my daughter was a year old. We agreed she’d spend some nights with her father, but the judge dealing with our divorce was not comfortable with overnight visitation because she was so young.

There’s also the risk of one partner being more financially savvy than the other, which means the divorce agreement could be drafted to the benefit of one and the detriment of the other. You may not realise this until it’s too late, and the ramifications of this could end up costing you far more than if you’d had an attorney and financial adviser involved from the beginning of the process.

THE COSTS OF A DIVORCE

Prices vary depending on the circumstances and service providers. As a case in point, Parent24 found that an uncontested divorce (one in which both parties work together to amicably agree on the divorce terms) can cost between R7 000 and R10 000. If the divorce is contested and the spouses cannot agree to terms, this cost increases exponentially. An attorney’s fees start at about R2 000 an hour, an advocate can cost even more and court hearings also add up financially depending on how long a case takes to settle.

Another option is mediation, where an objective third party works with the spouses to temporarily set aside their differences to come to a settlement agreement. However, mediated and contested divorces can take years to resolve.

OTHER EXPENSES RESULTING FROM A DIVORCE

Aside from the direct costs involved in the divorce proceeding itself, there are many other less obvious expenses. While this may differ from person to person, these were some of the expenses I realised had to be factored into my monthly budget:

  • Setting up a new home comes with all sorts of expenses, from the deposit, rent, and rates and taxes to internet installation and furnishings. If you were renting a home with your former spouse, you also run the risk of losing your deposit when you move out.
  • Taking over your cellphone contracts and other services you may need that your spouse had been paying for prior to the divorce.
  • Extra childcare or daycare expenses.
  • Setting up your own medical aid and possibly moving your child or children across to your plan. This can be costly because the price of medical aid is much higher for a primary member than when you are a dependant.
  • Taking out insurance policies like short-term insurance for your new home.
  • Moving your child’s school if you’re moving to a new neighbourhood. This can be extremely expensive if you’ve already paid for a full year at one establishment that has a policy of refusing refunds if a child is moved. You could end up effectively paying double school fees.
  • Bond registration costs if you’re purchasing property.
  • A life insurance policy, specifically to cover maintenance obligations. Not having this could lead to uncomfortable situations. For example, if your ex passes away, maintenance is a preferential claim on the estate, which means your former spouse’s beneficiary may be forced to sell assets to free up cash to cover this claim.
  • Consider making changes to your retirement plan, especially if your ex is entitled to half of your pension.
  • Think about family and/or trauma counselling as a worthwhile option to pursue.
IMMEDIATE ACTIONS TO PURSUE
  1. Stop, breathe and take your time to decide what is in your best interest. Consult with your lawyer and financial adviser, and don’t feel rushed into making decisions, particularly if you’re in an emotional space. Make sure you’re protected and that the settlement is fair on all parties – now and into the future
  2.  Ensure your divorce settlement makes provision for your child’s education costs, including tertiary education.
  3.  Make sure maintenance payments increase in line with inflation. Be cognisant of the fact that maintenance and visitation rights are treated separately. Understand your rights and responsibilities.
  4. Consider if you need to change jobs to account for your change in income.
  5. Change the beneficiaries on your life insurance policy.
  6. Change your will. Remember, you have three months to do this, otherwise, in terms of section 2b of the Wills Act, it will be deemed that it was your wish that your former spouse is your beneficiary.
  7. Redo your estate planning with your financial planner and consider setting up a testamentary trust to ensure the assets you’re leaving to your children are appropriately managed.
  8. Gather a strong support network around you. Take time for yourself and make sure you have a safe space to talk about how you’re feeling.
  9. Check what you and your former spouse have signed surety for in the past. Ensure that any sureties you may have signed are cancelled.

Make sure you have a trusted financial adviser to walk the journey with you. It is important to have an objective expert cut through the emotion and help you come up with a plan that feels doable. It’s also good to know you can rely on someone who really has your wellbeing at heart.

Lee Hancox is head of channel and segment marketing at Sanlam


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March 29 2020