Don’t let money get in the way of a good relationship

With the impending royal wedding all eyes are on Prince Harry and Meghan Markle as the world awaits the next step in their regal romance. Media reports have announced that this power couple have opted to forego signing a prenup, and will instead live out their everlasting fairy tale without securing their respective riches.

But, with an estimated fortune of $54 million and the high divorce statistics in the world, one would think that the romantic Prince would have been strongly advised to sign on the dotted line.

For many couples looking to build a successful future together, the issue of money cannot be avoided. Although financial security may not be top of the list for many couples looking to settle down with their dream partner, lack of transparency regarding one’s financial situation upfront can lead to marital turmoil in the future.

If couples want to experience a successful and mutually beneficial relationship, it is essential that both parties are completely honest about their financial position going into the marriage, as well as their financial goals for the future.

Arguments around spending habits, a lack of disclosure of one’s income and little to no understanding of South Africa’s matrimonial property regimes, can all get in the way of a successful relationship.

Money problems are the most common reason for divorce, it is therefore imperative that couples openly discuss their finances prior to getting married should the marriage end in divorce. This transparency should apply equally from the very low-income couples to the super wealthy.

One way married couples or cohabiting partners looking to get married can manage their finances effectively is by meeting with a financial planner.

Most couples, particularly those who are just starting out in their careers and have not accumulated any wealth, don’t consider meeting with a financial planner as important. The reality is that with the high divorce rate in SA many relationships turn out not to be that “everlasting fairy tale”, so it is vital that couples completely understand the various matrimonial property regimes and their financial consequences.

The Matrimonial Property Regime of all marriages legally governs the property ownership between spouses and the allocation thereof in the event of divorce or death. There are three types of matrimonial property regimes recognised in the South African Law:

1. Marriage in community of property: This is when both spouse’s assets and liabilities are joined together as one community estate and both parties are equal partners owning an undivided half share of the entire joint estate regardless of who brought what into the marriage. This is the “default regime” and, if no ante-nuptial contract is entered into, this is the regime that applies. In the event of divorce or death, the assets must be divided equally between both parties.
2. Marriage out of community of property without accrual: In this case, an ante-nuptial contract (ANC) is drawn up. Each spouse is in control of their own estate consisting of assets and debts that they had before entering into the marriage agreement as well as any individual assets and debts that they acquire during the marriage. In the event of divorce or death, each spouse will retain their separate estates and is unable to claim from the other. However, where one member of the marriage has been the homemaker and child carer, that member often successfully claims maintenance from the other.
3. Marriage out of community of property with accrual: This marriage contract is similar to that of a standard ANC as described in 2 above, the difference is that each party’s assets prior to the marriage and their value is registered in the ANC and, when the marriage is dissolved, only the value of the assets acquired during the marriage (the accrued estate) will be shared equally and the assets listed in the ANC or their equivalent value, including inflationary increases, is not shared.

While an attorney is more than qualified to provide information and advice on the different available matrimonial property regimes, they are generally not equipped to provide advice on how to start a financial plan.

Having a financial plan drawn up to put couples on the right path to help them achieve their short term and long term lifestyle goals and objectives, is important as it provides clear steps each party needs to take and can prevent stress and frustration down the line.

Some of the most common goals that couples should save towards include:

• Saving for a deposit on a property
• Funding children’s education
• Becoming financially secure at retirement
• Insurance to provide for the lifestyle needs of the family in the event of death, sickness or disability of one of the spouses.
• An emergency fund for unexpected costs which can help enormously to ensure that couples do not get themselves in serious debt.

Couples are often drawn to one another because they view the world differently. Every individual will have their own set of priorities and aspirations and it is not realistic to expect one to have the same outlook on managing finances as their spouse.

However, I do think it’s imperative that each spouse understands how the other views money. That’s where the importance of a written financial plan comes into play, as it helps couples to agree on their joint long-term lifestyle goals and dreams, and outlines the steps each agree to take to be able to achieve these goals together.

A financial plan should not only be viewed as a way to protect one’s financial interests in a relationship or marriage, it also provides a clear structure ensuring provision for one’s family and a path outlining steps to be taken to achieve their lifetime goals with each party contributing and playing a role.

Changes in careers, promotions or the pursuit of additional income streams may result in disparities between income, making it essential that the plan is regularly reviewed and updated.

No matter your net worth, it is important that both parties’ protect their assets. When poverty comes through the front door, love often leaves out the back door.

So, it’s never too late to put a financial plan in place and to involve your ‘other half’ in your plans.

Janine Player is a financial planner at Old Mutual Private Wealth Management.

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