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No one enters marriage expecting divorce. Unfortunately, things don’t always work out the way we expect them to. How do you protect your savings and your financial future from divorce?
You can do this before you get married by signing a prenuptial (prenup) agreement. Also known as an antenuptial or premarital agreement, the contract sets out terms and conditions protecting spouses should the marriage dissolve.
Tertius Bossert, head of FNB Law on Call, explains that it is advisable to sign a prenup as it protects both spouses from each other’s creditors. “It is specifically useful if one spouse owns their own business and is therefore more at risk of having creditors take legal action against them for business-related debts,” he says.
Entering into a prenup is a personal choice, isn’t compulsory, nor should you be forced into it. Says Clive Hill, legal adviser at Sanlam Trust: “The accrual system was designed to recognise the different and unique contributions each one makes to the marriage. As such, it is a fair system. However, each person intending to get married should consider their position and take independent legal and financial planning advice.”
But what do you do if you want a prenup put in place, yet your future spouse does not?
Unless your assets are held in a separate legal entity, such as a trust, you will have no protection, says Michelle Dubois, legal marketing specialist at Liberty. “Trust is an important part of financial security in any partnership, and marriage is exactly that: a partnership. Discuss your concerns about signing [a prenup] and rather address them before putting yourself at risk,” ?she explains.
What you need to remember, though, is that a trust will only protect the growth in your assets, not their original value.
This is why it is so important for future spouses to talk about their financial issues and perspectives. Says Dubois: “It is equally important to retain your own bank account and credit record. If you do not have your own bank account, and your spouse passes away, their account will be frozen, creating a difficult situation for you financially.”
Entering into a prenup should not be taken lightly. It requires serious consideration and thought, as it is extremely difficult to change your marriage contract after the wedding.
Hill explains that you would have to apply to the High Court, which is an expensive exercise, and show good reason why it should grant your request. If your circumstances change during marriage (i.e. one spouse now becomes a stay-at-home parent) or you separate from your spouse without getting divorced, and if you can prove a need, the maintenance court can grant you monthly maintenance.
Should you get divorced, the settlement agreement will determine the maintenance, if any.
This is an excerpt from an article that originally appeared in the 29 October 2015 edition of finweek. Buy and download the magazine here.
