Marriages begin with plenty of emotion, and they usually end that way as well. It isn’t so easy to keep a cool head. To ensure you can carry on with your life in confidence as soon as possible following a divorce it’s important to get as much information as you can. This will enable you to make the right decisions – including those related to finances.
Although the divorce rate has fallen significantly in recent years, around a third of marriages still fail. In addition to strong feelings, such as disappointment and a desire for retribution, divorce usually results in considerable anxiety as well. And for good reason – the financial consequences of divorce can be significant. For example, the couple who are divorcing may have to sell their home, and pension contributions may have to be divided as well. Here is an overview of the key points:
Once the divorce is final, the AHV assets accumulated during the marriage can be split evenly and distributed to both party’s AHV accounts. In order to split the AHV assets it is important to submit a request to the relevant social security administration office. Only then can the pension be calculated. The application form can be downloaded from the website of the AHV social security administration office in question: www.ahv-iv.ch.
Pension fund assets are also divided evenly between the two spouses. The calculation is based on the length of the marriage – i.e. the period from the date the couple were married to the date they were divorced. The calculation also includes the interest accumulated during the marriage. If a separation of assets was agreed in a contract before the marriage, this will have no effect on the division of the pension fund assets. The separation of assets only applies to assets that existed before the marriage.
The spouse who benefits from the pension fund adjustment does not receive the money as a payout. Instead, the funds are transferred directly to the pension fund. If the spouse is not a member of a pension fund and is younger than 59, the money will be transferred to a vested benefits accounts or a vested benefits policy. Corresponding products are offered by banks, the post and, of course, insurance companies like Swiss Life.
What happens with private retirement savings depends on the marital property regime that has been agreed in the marriage contract. If the couple have not made any arrangements, the community of acquisitions regime applies. In this case, which is the most common one, the Pillar 3 assets are shared equally. The same is true for the community of property regime. By contrast, if the property is separated, the assets are not divided. In addition, the couple may forgo the division of the private retirement savings when they divorce, or they may divide the assets in another manner.
A divorce often raises the question of what to do with the couple’s property. Will the house or apartment be sold or will one of the partners remain in it? If you bought the property jointly, the party that moves out must receive compensation. The payment depends on the present value of the property.
However, things aren’t so simple if the mortgage hasn’t been paid off. This is because with a joint mortgage, both spouses are jointly liable, even if one of them has moved out. In other words, each of the divorced parties is liable for the other party's debt if he/she is unable to pay. The mortgage agreement thus remains in place despite the divorce. While it is possible to get out of a mortgage, this often involves a high early repayment penalty.
Draw up an agreement to govern a possible divorce
It is important to have financial foresight when purchasing a property. So you should draw up an agreement to determine what to with the mortgage in the event of a divorce. This could also affect your choice of mortgage. Those who act in a prudent and self-determined manner will be able to carry on with their lives confidently in financial terms in the event of a divorce.