Accrual Calculations

 

 

Legally you are protected in terms of your marriage contract that you signed. This is however a financial calculation so your decision is made in the right upper quadrant.

Finances are feared by most women because of its smart little cousin Math. Finances and math are not the same and in this life I will bet you my last Kruger Rand that money is more important than this cousin.

Please note that the accrual calculation is not maths, it is a financial decision and it needs to be Finsmart decision. So please be Divorcesmart®.

How do we divide the estate so that it makes financial sense or should I take 50% of everything?

 

Married out of  Community of Property with Accrual

 

   

Spouse A

Value

Spouse B

Value

Primary Residence

R 1 500 000

Vehicle

R 80 000

Retirement Annuity

R 374 000

Savings

R 200 000

Vehicle

R 120 000

Retirement Fund

R 400 000

Pension Fund

R 1 200 000

   

Investments

R 900 000

 

 

 

R 4 094 000

 

R 680 000

Less Liabilities

R 195 285

   

Total Value of the Estate

R 3 898 715

   
       
       

Spouse A

R 3 974 000

   

Less smaller Estate

R 680 000

   

Divide by 2

R 3 294 000

   

Spouse B has a claim of

R 1 647 000.00

   

 

 

Dividing everything in half could sometimes be detrimental to your financial wellbeing. I find that there are more creative financial options that one can use in order to retain as much of your wealth as possible. There are always taxes or fees to consider. Get a financial advisor to analyse your situation and make recommendations that are viable.

Above is an example of an estate where each party is entitled to a share of R1 679 000.

  • If the property has no debt or little debt as in the above example then you could agree to have the property transferred into your name. There is no transfer duty, but you will pay legal costs which you should negotiate with your lawyer. Some provinces or rather municipalities also request 6 months of rates and taxes before they transfer, this will be refunded on your account but not paid back in cash. This could create cash flow problems if you did not budget for this.

 

  • This will result in no monthly bond repayments and also gives you an asset that you can gear. The bond repayment on a property of R1 000 000 at current interest rates is approximately R9 000. Subject to your income you receive, you could use half of that amount and invest it towards your retirement or get a qualification.

 

  • The difficulty with taking the property with the view of selling it is that it is brick and mortar. If the property market is in a slump it might take 6-12 months before you will have cash in the bank.

 

  • he additional R147 000 and some expenses can be claimed from Spouse A’s investment of R900 000. (This excludes maintenance as well as rehabilitative maintenance)

 

  • This leave spouse A with a retirement fund intact, with most investments (wealth) not destroyed. Spouse A would have to invest in a new property or rent a property.

 

  • I think that simply claiming 50% of the retirement funds  and selling the property in order to generate cash will reduce the  total wealth.

 

 Consider these costs:

  • Profit on property less agents fees will be approximately R1500 000 – 7% = R1 395 000 (loss of R105 000)
  • Tax on spouse A’s retirement funds should 50% of benefits be taken in cash will be approximately R 154 440.
  • Tax on spouse’s retirement funds should 50% of benefits be taken in cash will be approximately R 67 950.
  • The division excludes market risk, investment risk as well as your future retirement planning.
  • Add to this legal fees of at least R30 000 per spouse then you are giving away approximately R387 390 of you combined wealth.

 

Make sure you get financial advice before signing your settlement agreement. Get a financial plan.

 

Christel du Toit – Specialist Divorce Financial Planning and Wealth Manager

 

 

Accrual Calculations

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