By: Dr. Sunday Adache; Managing Director/ Principal Officer;
PKF corporate; Contact: admin.lesotho@pkf.com +266-22329799
TILL DEBT DO US PART: A FINANCIAL PLANNING GUIDE FOR COUPLES (2)
The Bible, says “what God has joined together, let not man separate” (Matthew 19:6) There is ever increasing rate of divorce as the years roll on. A casual visit to the courts of law would indicate that the court processes are slower than the rate of divorce requests. While no one marries intention of divorce, its happening, hence, as the old saying goes, prevention is better than cure. This is why it is wise to give this serious a due attention. Continuing from the first part we shall look at other important issues herein.
Shared Verses Separate Finances Or Accounts
Decide whether you will have joint accounts or keep separate accounts. This is one of the thorniest issues to predetermine for a healthy relationship. In most cases, joint accounts are common for shared expenses like rent, groceries, and utilities, while personal accounts can be used for individual spending. Deciding whether to create a joint bank account or keep entirely separate bank accounts can be facilitated by setting spending limits on specific categories and creating a shared budget template to track expenses. A helpful app to facilitate this is Splitwise, which allows couples or groups of people to track and allocate joint expenses over time.
Cultural Expectations
It is possible that both of the intending couple may come from different clans, tribes, nations or religious backgrounds. Traditional and cultural expectations regarding financial contributions to extended family (such as lobola and other family responsibilities) can influence financial planning. Being honest about your financial status and ability to make ends meet is crucial. Your proposed plan should be realistic and not compromise your happiness and ability to provide for your direct family.
Deciding On Joint Investments
With a proven financial prudence in place before marriage, it will be much easier to apply the experience in marriage. Therefore, before getting married, do put efforts to enhance personal financial management skills. First, it is crucial to build a cash reserve for emergencies or contingencies. As a rule, set aside enough money to cover three to six months of expenses. This amount will be influenced by the number of dependents, your housing, groceries, and risk and health coverage, to mention a few considerations. The contingencies account is for unforeseen expenses outside normal budget. Issues like sudden loss of job or business, so as to avoid taking on debt to finance survival, which is not ideal, especially in the current high-interest rate environment. The cash reserve does not mean keeping cash under your mattress; instead, consider opening a basic non-fixed savings or investment account in a money market fund. This will give you the necessary liquidity requirements while earning a stable and attractive yield.
Regardless of your age or retirement timeline, capitalising on tax-friendly investment products will benefit your future life and reduce pressure on you and your future spouse on whether you can retire comfortably together. Examples of such investments include employer provident funds, retirement annuities (RAs) and tax-free savings accounts (TFSAs). After ensuring your contingencies account has sufficient reserves, maximise your contributions to a financial investment instrument.
Is purchasing your first property together a shared vision? If so, marriage can make buying a home easier because two incomes are better than one. For example, you may qualify for a larger loan by combining your income with your spouses’. However, the terms and size of your loan will also depend on each spouse’s credit score. Here, the topic of debt comes back into play and emphasises the importance of having a good credit history for you and your spouse. Having conversations about whose name the property will be registered, who will be responsible for the bond costs every month, and how your marital property regime will impact ownership in the case of unforeseen divorce will be crucial.
Understanding Lesotho’s Marital Regimes
The marital laws and practices in Lesotho is similar to that of South Africa, there are three types of matrimonial regimes. These include:
- Marriage in community of property: a marriage is classified as in community of property if there is no antenuptial contract. Here, all assets and liabilities of each spouse are joined into one communal estate, with each spouse owning an equal share of 50%. Any assets and liabilities accumulated by either spouse will be added to the communal estate and shared equally. Spouses married in a community of property do not have their own estate, but a joint estate shared equally. Only half of the estate will be subject to estate duty if one spouse dies. In the unfortunate case of a divorce, the estate will be shared 50-50 between spouses, including all assets and liabilities acquired before and during the marriage. However, gifts or inherited assets are excluded from the communal estate.
- Marriage out of community of property (excluding the accrual system): This means getting married with an antenuptial agreement. It may be a sensitive topic as it could raise signs of potential mistrust. However, an antenuptial agreement can protect both spouses’ interests in the event of a divorce by protecting assets accumulated before marriage. This contract ensures that both spouses keep their separate estates and are not responsible for one another’s liabilities or have part ownership of one another’s assets accumulated before marriage. An antenuptial agreement without accrual means that spouses retain what is theirs before marriage and what they have accumulated during the marriage – the estate will not be shared upon divorce.
- Marriage out of community of property (with accrual): This regime sees each spouse keep the assets and liabilities acquired before marriage. The difference is that the total wealth accumulated by spouses during the marriage is shared equally on divorce or any percentage agreed to in the antenuptial agreement. Any inherited assets or donations between spouses during the marriage will be excluded from the claim. Setting clear rules in advance simplifies and reduces the cost of legal proceedings, as there is less need for negotiation.
Planning for divorce may sound like planning for failure; however, the number of divorcesis rising. A casual visit to courts across the country would amaze one on the rate of divorces taking place in our society
Medical Aid and Risk Considerations
After assessing your joint financial position, you may have determined various inefficiencies or shortfalls in your joint coverage. It is, therefore, important to discuss this with your wealth manager/financial advisor for an in-depth analysis. Below, we highlight those aspects that should be reviewed.
A minor consideration for a new couple commonly overlooked is emergency contact details, vital in tracking down your loved one if something unexpected happens. So, ensure you update all your emergency contact details at your doctor, dentist, gym, work, and car tracking company, where applicable. We shall consider more detailed aspects of insurance offering in the next part of the paper.
Disclaimer: https://pkflesotho.com/publications/disclaimer/
Business and Investment Guide
By: Dr. Sunday Adache; Managing Director/ Principal Officer;
PKF corporate; Contact: admin.lesotho@pkf.com +266-22329799
TILL DEBT DO US PART: A FINANCIAL PLANNING GUIDE FOR COUPLES (2)
The Bible, says “what God has joined together, let not man separate” (Matthew 19:6) There is ever increasing rate of divorce as the years roll on. A casual visit to the courts of law would indicate that the court processes are slower than the rate of divorce requests. While no one marries intention of divorce, it’s happening, hence, as the old saying goes, prevention is better than cure. This is why it is wise to give this serious a due attention. Continuing from the first part we shall look at other important issues herein.
Shared Verses Separate Finances Or Accounts
Decide whether you will have joint accounts or keep separate accounts. This is one of the thorniest issues to predetermine for a healthy relationship. In most cases, joint accounts are common for shared expenses like rent, groceries, and utilities, while personal accounts can be used for individual spending. Deciding whether to create a joint bank account or keep entirely separate bank accounts can be facilitated by setting spending limits on specific categories and creating a shared budget template to track expenses. A helpful app to facilitate this is Splitwise, which allows couples or groups of people to track and allocate joint expenses over time.
Cultural Expectations
It is possible that both of the intending couple may come from different clans, tribes, nations or religious backgrounds. Traditional and cultural expectations regarding financial contributions to extended family (such as lobola and other family responsibilities) can influence financial planning. Being honest about your financial status and ability to make ends meet is crucial. Your proposed plan should be realistic and not compromise your happiness and ability to provide for your direct family.
Deciding On Joint Investments
With a proven financial prudence in place before marriage, it will be much easier to apply the experience in marriage. Therefore, before getting married, do put efforts to enhance personal financial management skills. First, it is crucial to build a cash reserve for emergencies or contingencies. As a rule, set aside enough money to cover three to six months of expenses. This amount will be influenced by the number of dependents, your housing, groceries, and risk and health coverage, to mention a few considerations. The contingencies account is for unforeseen expenses outside normal budget. Issues like sudden loss of job or business, so as to avoid taking on debt to finance survival, which is not ideal, especially in the current high-interest rate environment. The cash reserve does not mean keeping cash under your mattress; instead, consider opening a basic non-fixed savings or investment account in a money market fund. This will give you the necessary liquidity requirements while earning a stable and attractive yield.
Regardless of your age or retirement timeline, capitalising on tax-friendly investment products will benefit your future life and reduce pressure on you and your future spouse on whether you can retire comfortably together. Examples of such investments include employer provident funds, retirement annuities (RAs) and tax-free savings accounts (TFSAs). After ensuring your contingencies account has sufficient reserves, maximise your contributions to a financial investment instrument.
Is purchasing your first property together a shared vision? If so, marriage can make buying a home easier because two incomes are better than one. For example, you may qualify for a larger loan by combining your income with your spouses’. However, the terms and size of your loan will also depend on each spouse’s credit score. Here, the topic of debt comes back into play and emphasises the importance of having a good credit history for you and your spouse. Having conversations about whose name the property will be registered, who will be responsible for the bond costs every month, and how your marital property regime will impact ownership in the case of unforeseen divorce will be crucial.
Understanding Lesotho’s Marital Regimes
The marital laws and practices in Lesotho is similar to that of South Africa, there are three types of matrimonial regimes. These include:
- Marriage in community of property: a marriage is classified as in community of property if there is no antenuptial contract. Here, all assets and liabilities of each spouse are joined into one communal estate, with each spouse owning an equal share of 50%. Any assets and liabilities accumulated by either spouse will be added to the communal estate and shared equally. Spouses married in a community of property do not have their own estate, but a joint estate shared equally. Only half of the estate will be subject to estate duty if one spouse dies. In the unfortunate case of a divorce, the estate will be shared 50-50 between spouses, including all assets and liabilities acquired before and during the marriage. However, gifts or inherited assets are excluded from the communal estate.
- Marriage out of community of property (excluding the accrual system): This means getting married with an antenuptial agreement. It may be a sensitive topic as it could raise signs of potential mistrust. However, an antenuptial agreement can protect both spouses’ interests in the event of a divorce by protecting assets accumulated before marriage. This contract ensures that both spouses keep their separate estates and are not responsible for one another’s liabilities or have part ownership of one another’s assets accumulated before marriage. An antenuptial agreement without accrual means that spouses retain what is theirs before marriage and what they have accumulated during the marriage – the estate will not be shared upon divorce.
- Marriage out of community of property (with accrual): This regime sees each spouse keep the assets and liabilities acquired before marriage. The difference is that the total wealth accumulated by spouses during the marriage is shared equally on divorce or any percentage agreed to in the antenuptial agreement. Any inherited assets or donations between spouses during the marriage will be excluded from the claim. Setting clear rules in advance simplifies and reduces the cost of legal proceedings, as there is less need for negotiation.
Planning for divorce may sound like planning for failure; however, the number of divorcesis rising. A casual visit to courts across the country would amaze one on the rate of divorces taking place in our society
Medical Aid and Risk Considerations
After assessing your joint financial position, you may have determined various inefficiencies or shortfalls in your joint coverage. It is, therefore, important to discuss this with your wealth manager/financial advisor for an in-depth analysis. Below, we highlight those aspects that should be reviewed.
A minor consideration for a new couple commonly overlooked is emergency contact details, vital in tracking down your loved one if something unexpected happens. So, ensure you update all your emergency contact details at your doctor, dentist, gym, work, and car tracking company, where applicable. We shall consider more detailed aspects of insurance offering in the next part of the paper.
Disclaimer: https://pkflesotho.com/publications/disclaimer/