Retirement, Annuities, Pension and Provident Funds in Divorce Proceedings (Hereinafter Retirement Benefit)
The courts have adopted a “clean break” principle when it comes to financials in the divorce. This means that the non-member of a retirement-, pension fund or annuity is entitled to his or her share within 60 (sixty) days from date of divorce.
In a marriage in community of property the fund and or annuity falls within the joint estate and the non-member spouse would be entitled to half of the retirement benefit, unless the parties agree to retain his/her retirement benefit.
In a marriage out of community of property (with or without accrual) the spouses do not have an automatic claim against the other parties retirement benefit and any division of the retirement benefit may be agreed to in a Settlement Agreement.
The non-member can elect whether his/her share should be paid out or transferred to another fund of his or her choice.
The tax implications for this election by the non-member spouse is too broad for this scope and we recommend that you seek advice from a financial advisor in this regard.
In short if the non-member spouse elects for the retirement benefit to be transferred into his/her retirement fund, no tax is payable. The non-member spouse will only be taxed if he/she elects to have the cash retirement benefit paid out in cash.