The news of Bill and Melinda Gates filing for divorce has made headlines and sent shockwaves through the philanthropic world. After 27 years of marriage the couple is worth an estimated $146 billion (R2 trillion) and has no prenuptial agreement in place to divide their fortune. This includes their $125 million family home in Washington DC.
David Thomson, Senior Legal Adviser at Sanlam Trust, says that one of the hardest parts of divorce is that one person must move out of the family home that they might effectively jointly own. “The couple needs to think about who will pay what and how, for the right to keep the home. This can be particularly traumatic if there are young children involved. If like Bill and Melinda Gates, the couple is married in Community of Property, the “stay-at-home” spouse who has sacrificed their career for the family is protected because they jointly own the property along with other assets. Buying and taking transfer of a property and furnishing it, is also very expensive and so it is important to think carefully about your next move. It’s always advisable to involve a trusted financial planner and reputable lawyer in proceedings from the start.”
There’s lots to process emotionally, so professional help with the practical financial implications could make a big difference. “You have to consider the impact of divorce on the whole financial picture. In a partnership, one person may have taken responsibility for the finances, so following a divorce, sudden financial independence could be daunting for the other partner. Additionally, divorce might mean that one has to go back to work. Plus, it has potentially big consequences if there are children involved as arrangements must be made regarding payment of school fees; medical aid and the like.”
While the amount of money at stake in this case is unimaginable for most of us, the financial side of any divorce must be handled with care. Here, Thomson shares some considerations on dealing with the financial side of a split:
Get real about retirement: Firstly, if you’re entitled to a portion of your spouse’s retirement fund, consult a financial adviser on how best to reinvest it for your retirement. Secondly, when balancing your immediate needs with your retirement savings, consider how to boost your retirement provisions. Often, following a divorce, there’s the need to redouble savings efforts to make up for any divorce settlement withdrawals and the opportunity cost of lost compound-interest.
Consider your age and stage: If you get divorced when you’re younger, you have time on your side, so you can potentially look to adopt a higher risk investment strategy as you can likely withstand more market volatility. This could help you gain back ground with your retirement savings. In older life this strategy could prove disastrous. Again, this is where a financial planner could prove invaluable.
Beat the changes with a budget: If you go from having two incomes to one income, inevitably there’s going to be quite an adjustment. Be real about your circumstances and current expenses, then decide what changes you need to make. Take any new expenses into account, like childcare, for example. Adjust your budget accordingly, cull extra costs when possible, and consider ways to potentially earn extra income. Could it be time to start a savvy side hustle? Think about how to capitalise on your marketable skills.
Change your insurance: You’ll probably need to revise your short-term, life and medical insurance policies. If you take out a new life policy, name new beneficiaries and remove your ex-spouse from old policies, should you wish to do so. Make sure that your children are covered by either your or your ex-spouse’s medical scheme or hospital plan. Maintenance payments should be increased according to annual inflation.
Update your will: You get three month’s grace after a divorce, meaning that should you pass away during that time, it’ll be assumed you did not want your ex-spouse to be your heir. That means your estate will go to your children or next of kin. If you fail to change your will after three months, then your ex-spouse will stay your heir as prescribed in your last will and testament.
Add up your assets: Enlist a professional to appraise all your assets at current market value. That way, you know whether to liquidate them or transfer them as intact assets to your ex-spouse, should this action be required either by your settlement agreement or by court divorce Order. Consider, for example, whether you need to sell your family home and if it makes sense to do so in the current housing market. Make sure your divorce attorney pursues a claim for all retirement monies and assets you’re entitled to. Have all the assets and benefits transferred as soon as possible to the rightful party to avoid complications brought on, for example, by the subsequent re-marriage; incapacity or even death of one of the parties.
Divorce is complicated, no matter who you are and how wealthy you may be. Be gentle with yourself, get the professional help you may need, and take it one step at a time. Whether you need to change jobs, move houses or make other big adjustments, go slow and make sure all decisions make sense with a greater financial picture in mind.
PERSONAL FINANCE