Coping with the finances of divorce
LOVE is not just a wonderful thing - it can, unfortunately, also be blind. "Till death us do part" does not seem to be taken very seriously, judging by the many divorces in the country, not to mention the costs and the consequences that follow >>
One combined budget becomes two. Faced with divorce, a couple requires separate homes and furniture and rates, taxes and electricity will be doubled.
The increase in professional people getting involved in mediation can often save a couple substantial amounts of money that would have been spent on lawyers.
The one problem is that many mediators don't have the knowledge or experience to explain the full financial implications of divorce. Their attempts to assist the parties to try and reach a settlement, acceptable to both, are often complex.
Divorce is never a win-win or win-lose situation, but a lose-lose situation for both parties and often when a warring spouse goes full tilt, rationality goes out of the window.
What seems so obvious to a third party, looking in from the outside, is that emotions should be left out of the negotiations.
At the early stages of discussion with unhappy couples - and once separate budgets have been drafted - both parties realise how difficult it will be to make ends meet.
If money was the only issue destroying the relationship, it would be great if this could assist in saving the marriage. But by this time, it's probably too late.
In preparing a budget, all assets must be fully disclosed. In most cases, this is where one spouse runs into major problems.
All of a sudden, the assets cannot be found and all the mediator is left with is the word of the spouse who is more affluent.
Even antenuptial contract marriages, with accrual, will not help to locate well-hidden assets, particularly if the divorce has been planned well in advance.
I understand certain court orders compel disclosure but, all too often, I see the less knowledgeable spouse and the legal team making insignificant findings.
To help the less conversant spouse, a few suggestions follow on how to go about uncovering undisclosed assets:
Income tax returns
One of the ways of determining a spouse's earnings is from their tax return.
Any capital growth assets sold would reflect capital gains tax and interest earned from investments would also be reflected. It's rare that a spouse purposefully fails to disclose income by anticipating that the tax return could be used in a divorce action.
With FAIS regulations in place, a financial advisor would doubtless have prepared a full financial needs analysis and financial plan, copies of which would not be difficult to obtain from the advisor.
Proof of earnings
A pension fund statement will show pensionable earnings, although bonuses and share options would be excluded.
This is easily available from the company where the spouse is employed.
When it comes to insuring for income replacement, it would be abnormal not to disclose your full earnings.
What's the point of under-insuring and then having a claim which does not cover your living expenses?
As important as it is for spouses to work together to understand what would happen to the family in the event of the breadwinner's death or disability, with divorce being so high, it is another good reason to understand the families' financial matters.
- The writer is financial adviser of Bryan Hirsch Colley and Associates. Email bryanh@bhca or telephone 011-880-4888.