Estate planning and divorce in South Africa
In the middle of the divorce process, estate planning is often far from people’s minds. Yet division of assets and new implications for wills make it necessary to carry out estate planning as soon as possible after the divorce process is complete. Here are some of the elements of estate planning you should work through if you are getting a divorce or are recently divorced:
Maintenance and planning your estate
If your ex-spouse were to die, it would be difficult to claim maintenance from their estate if this isn’t expressly included in the divorce settlement agreement. Make sure that the agreement covers this possibility so that there is adequate support for you and any dependents.
Protecting assets for your estate
As soon as a divorce is finalised, make sure that registration or transfer of assets between you and your ex-spouse is scheduled. If you leave this process too late, death of either party could complicate any claims over assets.
Choosing between scheduled and lump sum pension fund pay-outs
In the past, if a non-member spouse was named in a spouse’s pension fund as a beneficiary, the non-member would only be eligible to receive a pay-out if the other part retired or died. An amendment to the Pensions Funds Act in 2007 means that former spouses can now claim their scheduled benefits immediately after the divorce is finalised.
If you are named in a shared pension fund, this gives you a choice: Either you can take a (taxed) lump sum, or transfer the money to a pension fund for yourself. The latter is advisable for the tax benefit as well as the greater long-term financial security it offer.
Planning your estate and will after divorce
It is crucial that you update your will within three months of your divorce being finalized. If your will remains unchanged, the result could be that your former spouse would inherit your estate upon your death, even if you had remarried and had more children with your second spouse.
Planning guardianship of children
If your divorce agreement stipulates that you will have joint custody, your former spouse will automatically receive sole custody in the event of your death. If you would rather have a nominated alternate guardian appointed as primary care provider, this must be arranged in your divorce agreement.
Make sure you have planned for your estate to provide sufficient support
If you have children who will be dependents for some time, it’s important to make sure that there is enough in your estate (either in assets or a life insurance policy) to provide for them. Planning the value of your estate around the time of a divorce will help to ensure that any dependents will have a safety net in the event of misfortune.