Marriage Financial Considerations: July 18-19, 2009

How do you deal with the Deal-breaker?

In the midst of wedding preparations, the details of marriage financial considerations may be far from your mind - beyond who's footing the bar bill!

But marriage is all about partnership - first finding the right partner, and then journeying together through the adventures of life.

As life is not fuelled on love alone the partnership must include significant financial considerations and like all other facets of marriage, it's most harmonious if your financial decisions are undertaken as a team.

Partnership beyond Apple-Pie

Back in the day the man was the one to handle the finances. He was the sole income earner and the wife took responsibility for the home and children.

This model seldom exists nowadays.

The cost of living has risen so much that not many families can live off a single income, but just as importantly women wish to further their careers too.

In fact, it is becoming quite prevalent that the wife earns the income, and the husband is the stay-at-home Dad.

With these changing circumstances, why should your marriage financial considerations not plan that partners take dual responsibility to oversee and understand the money area in the marriage?

Planning ahead can lighten marriage financial considerations

Like any other complex area of life, a plan always helps.

Without an understanding of where we are heading, and what our expectations are in the future, how are we going to know how to get there, or even when we have arrived?

A large part of this boils down to budgeting - understanding where the money comes from, how much is earned each month, and how much it costs to maintain the household each month.

By understanding these figures, you will have an idea of your saving capacity, and your ability to reach your financial goals.

And then there's the Ante Nuptial Agreement...

...assuming you sign one. When looking at marriage financial considerations you need to be aware that if no antenuptial contract is entered into, your marriage in South Africa will automatically be in community of property.

There are three ways in which we can be married in South Africa:

• in community of property;
• out of community of property subject to the accrual system; and
• out of community of property not subject to the accrual system.

Like any agreement, you need to be aware of and fully understand, the terms under which you are (or will be) married.

Take the time to read the detail of the agreement. It is far better to take additional time to fully understand what we are agreeing to, than sign in haste and repent at leisure.

What does it all mean?

In community of property means that both parties share equally in all each others assets and liabilities.

On dissolution of the marriage, the assets and liabilities are calculated, and are split equally between the spouses, irrespective of the contribution of either spouse at the start of and during the marriage.

As mentioned, this relates not only to assets but to liabilities as well.

Be fully aware of what you are agreeing to when asked to sign an agreement or an undertaking by your future spouse. You may end up liable for any debts that are incurred by your partner, which could have dire consequences on your latter financial wellbeing.

Out of community of property with accrual, means that you calculate what you own on entering the marriage, and these assets remain yours alone - they are not included as part of the estate on termination of the marriage.

Any additional value gained during the course of the marriage is split equally between the two spouses.

Out of community of property not subject to the accrual system, means that you retain the individual values of your own estates not just on entering the marriage, but on exiting the marriage as well.

In essence, the values of your two estates are valued separately, before and throughout your marriage.

Till Death Do Us Part

Amongst the other marriage fianacial considerations you should draw up a will or review your existing will. It is a relevant time for your parents to do so as well.

Whether or not you already have children, it is always a good idea to have a clause in your will providing for children.

A will deals with a complex area of the law so make sure you use a good attorney to draft yours.

And that's not all...

New Partner, New Beneficiaries?

Other marriage financial considerations relate to your risk and retirement planning.

You should consider whether it would be appropriate to change the beneficiaries on existing investments and policies, such as endowments, life insurance, unit trusts and retirement annuities.

In addition you should review the beneficiary of your pension and provident fund benefits.

"We have no need for marriage financial considerations"

Few of us plan a wedding thinking about the dissolution of the marriage.

We all go in with the best of intentions, confident that we have found our soul mate, and our partner for life.

However, divorce is a reality, and when we consider that many divorces are as a result of financial issues, it is critical that we both discuss and plan for the non-romantic issues prior to the wedding.

I suggest you consult an independent, qualified Certified Financial Planner, as well as a lawyer specializing in matrimonial law. Covering these bases prior to the marriage is well worth the effort.

Ian Beere, CA(SA) CFP was the financial planner of the year in 2007.
His business partner Debbie Netto-Jonker CFP founded Netto Financial Services and was financial planner of the year in 2001.