Divorce – consequences for retirement provision

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Divorce – consequences for retirement provision

When a marriage breaks down, it isn't just painful for everyone involved, it has tangible consequences, not least financial ones. Divorce also has an impact on the retirement provision situation. In the following interview, family lawyer Carole Herzog discusses her day-to-day work.
Divorce – consequences for retirement provision

What are the three matrimonial property regimes and what do they entail?

  1. The participation in acquired property is the standard matrimonial property regime and also applies in the absence of a marital agreement: all assets accumulated during the marriage are shared equally in the event of a matrimonial property settlement. Everything that the individual spouses owned, received as a gift or inherited before the wedding is part of their own personal property and is not subject to the division of matrimonial property in the course of a settlement.
  2. The separation of property stipulates that there are no shared assets, instead, both partners manage their assets separately. This matrimonial property regime must be defined in a marital agreement or ordered by the court.
  3. The community of property must be expressly defined in a marital agreement. Under this regime, everything that has not been excluded as personal property belongs jointly to the spouses. This matrimonial property regime offers the largest freedom to define individual rules within a marital agreement, in this way, for example, real estate or a company can be excluded from the joint assets.

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Ms. Herzog, what questions should couples resolve before the wedding?

I would say that it's very important for the bride and groom to think about the legal consequences of a wedding. Many people might spend hours talking about surnames or the wedding menu, but don't know, for example, that there are three possible matrimonial property regimes and are likewise unaware of the consequences each would have in the event of a divorce. If more people were aware of this issue, many problems simply wouldn't arise.

I frequently encounter situations in which one partner has simply failed to take care of financial matters. Without knowledge and documentation, you are at a severe disadvantage, because you do not have a clear picture of the existing assets. It is just as problematic if you have a good plan, but don't implement it in your daily routine, using all accounts to make all payments, for example. At some point then, all parties lose sight of the situation.

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What consequences does divorce have on retirement provision in the 1st, 2nd and 3rd pillars?

If the divorce takes place before retirement, the situation looks like this: in the 1st pillar, that is the AHV, the income accrued during the marriage is divided equally by law, irrespective of the matrimonial property regime. This also includes parenting credit awarded to the couple for any children they have together. This division of the AHV assets takes place outside of divorce proceedings and is clearly regulated without any room for negotiation. In the event of a divorce after retirement, the spouses' pensions from the AHV are separated into two individual pensions. Due to the cap on the spouse's pension, the sum of both individual pensions is higher for many.

The 2nd pillar is more interesting thanks to its complexity – here too there is a provision for splitting the respective retirement assets in half, including interest and, under certain circumstances, voluntary purchases, if the divorce takes place before retirement. But there are numerous exceptions. For example, it is possible to forgo a settlement altogether – depending on the duration of the marriage or the matrimonial property regime. There is a reasonable amount of leeway here. As with Pillar 3a, the awarded retirement assets cannot be withdrawn, and they must be transferred to an individual pension fund or to a vested benefits account. If the divorce takes place after retirement, the law now stipulates that pensions must be divided.

In the 3rd pillar, the standard matrimonial property regime applies: savings from pillar 3a are treated in exactly the same way as a savings account or stock portfolio, for example. They are divided between the spouses as part of the matrimonial property settlement. However, pillar 3a assets cannot simply be withdrawn, as this is only possible after retirement or in certain exceptional situations. Consequently, assets from pillar 3a must be transferred into another 3a account or else a settlement must be made using unencumbered assets.

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What happens if one partner becomes disabled or dies during or after the divorce?

A disability has consequences for the child support/alimony calculation. However, if the divorce proceedings are still pending, the consequences are more difficult to assess. In the event of death, the situation is much clearer from a legal perspective – death renders any separation or divorce proceedings null and void because they are no longer necessary.

If the ex-partner dies after the divorce, the wife is still entitled to a widow's pension from the AHV and the pension fund, provided that she was older than 45 at the time of the divorce and the marriage had lasted at least 10 years. For men, the situation is more complex.

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What is the maximum period for which I must pay child support/alimony?

Parents are obliged to pay child support until their children reach adulthood or complete their first degree qualification or vocational training. In principle, both parents are obligated to provide for the children. Care responsibilities are taken into account when calculating child support payments. However, women are required to return to work quickly under the new divorce law. Previously, for marriages classified in Switzerland as "life-defining" (lebensprägende Ehe), the courts would generally order alimony to be paid until ordinary retirement. In the wake of recent rulings made by the Swiss Federal Supreme Court, the situation is no longer clear and is largely dependent on the individual circumstances.

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What is the impact on retirement provision, if one ex-spouse remarries or has children within a new relationship?

This complicates things and anyone in such a situation should definitely seek advice: in the 1st pillar, in the event of remarriage, any entitlement to a widow's pension lapses. Orphans' pensions continue to be paid out, however. In the 2nd pillar, the situation is very complex. The Occupational Pensions Act (BVG) stipulates that, in principle, spouse or partner pensions cease to be paid out in the event of remarriage. However, the regulations of individual pension funds may deviate from this, meaning that in certain cases, a pension will continue to be paid out. If there are children within a new relationship, the new family is considered deserving of protection under law and the children take precedence before the ex-partner in the event of death. If there are children from both relationships, it becomes even more complicated.

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How fair is Swiss divorce law?

This question is incredibly difficult to answer. In principle, the rules of matrimonial property law are very fair – in practice, however, it depends on how the two partners have lived together. Interestingly, the Federal Supreme Court takes a more progressive stance than our society as a whole here: It assumes that both parents have an equal desire to raise the children and that both partners should pursue gainful employment, even with children. As a generalization, we can say that men tend to feel at a disadvantage when it comes to childcare/custody and women when it comes to child support/alimony. Ultimately, fairness is in the eye of the beholder. The really big emotions usually arise with the issues relating to children and child support/alimony. Matrimonial property law and retirement provision are usually less emotive.

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What is the difference between separation and divorce?

Legal separation in the actual sense very rarely comes into play; the exception are people who do not want a divorce on religious grounds, for example. What is commonly referred to as "separation" are in fact settlement proceedings, that is, the period in which the partners live separately but are not yet divorced. For this period, the goal is to find a temporary solution relating to the children, child support/alimony and the living situation. If both parties consent to the divorce, it can take place at any time. Provided that the parties have lived apart for two years, one partner may then initiate a divorce even if the other does not agree.

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Getting a lawyer or mediation: What is more beneficial?

It depends. Mediation makes sense if the parties are capable of discussing things as equals and are in the position to find a fair solution together. However, if the roles in the relationship are such that one person has more power, then this is often reflected in the divorce agreement.

This is why I personally prefer a joint consultation with a lawyer. When I make appointments like this, I regularly influence the discussion and guide the conversation, in which I explain, for example, how a court would likely rule on a specific situation. Generally, the parties are happy to receive this information. After all, parties often fret over whether they could achieve more in court.

Solutions agreed upon by both partners are the most sustainable. However, if I notice that the differences have hardened, I break off the conversation. In such situations it is often more efficient and remedial for formal divorce proceedings to take place as quickly as possible. While I cannot personally comprehend parents letting a third person make decisions about their children, for example, in difficult circumstances it often helps when a judge hands down a ruling and says that this is the way things must be. After all, this opens up the path to an agreement.

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What are the most frequent mistakes married couples make when divorcing?

Spouses taking their conflict as a couple to the parenting level is definitely the biggest mistake made during divorce. This is often severely damaging to both sides and the children become the only influence that one can exercise over the other. In this way, the children become a means of scoring points, and, in the end, everyone loses.

What can become very expensive is if a party is convinced that they must fight over some principle or other, for example, forcing 50/50 custody at any cost or that the children shouldn't see the father during the week at all. I always try to explain to the parties that this is not a mathematical equation, and everyone involved must be able to live with the ruling in their day-to-day lives.

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What is your personal tip for people who would like to get a divorce?

A tip from the heart: make the children your focus and do not lose sight of their needs in spite of any grievances you may have. Personal tip: make sure to compile as much documentation as possible before the separation, knowledge will be very valuable in any upcoming proceedings. It helps enormously for the purposes of refuting specific claims and making calculations. Seek advice early on, even if it is to arrange a non-binding consultation. At the Women's Center, for example, women can get initial low-cost, low-threshold counseling to learn what they would face in the event of a divorce.

In discussions with clients, it quickly becomes obvious which couples have already discussed the legal issues beforehand. They often fare better in finding a joint and constructive solution – one that also benefits their children.

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Business owners: A special case

What should I take into consideration as a business owner if I want to marry?

Much of what applies to private individuals also applies to business owners. For those who own a company prior to marriage, it is particularly important to understand the options presented by a marital agreement, to ensure that the company is not placed in jeopardy in the event of a divorce. Real estate is also frequently part of a company's assets and would consequently be the subject of a divorce agreement. Business owners should seek advice about what a sensible solution would look like for their company. This may also involve protecting investments into the company made during the marriage.

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What should I take into account if I want to start a business during the marriage?

It is also possible to discuss a marital agreement as a married person, although the negotiating position is of course worse in this case. If a separation of property is defined in the marital agreement, the company need not be divided in the event of a divorce. If no matrimonial property regime is defined, a participation in acquired property will apply automatically, under which all assets accumulated during the marriage are split – as a rule this will also include the company. However, any payment required as part of a matrimonial property settlement could be made in installments. This constitutes a special regulation for the protection of the business.

The legal form of the company also plays a role here: for example, it is much simpler during a divorce to deal with shares in a GmbH (company with limited liability) or AG (joint-stock company) than a sole proprietor company. Either way, the company is subject to the matrimonial property settlement, unless otherwise stipulated in the marital agreement.

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My partner works in the company – how do we proceed in the event of a divorce?

From an employment law perspective, the employment relationship is usually dissolved because neither party wants to work together on a daily basis after the divorce. This can have an impact on child support/alimony, as it is potentially difficult for the spouse previously employed within the company to find an equivalent position on the open job market. Appropriately remunerated employment in the company has no impact on the matrimonial property settlement.

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What impact does insolvency during or after the divorce have for both spouses?

A spouse is not required to take on any debt that is in the other spouse's name. This means that one spouse may no longer receive anything from the company because there are no assets left but must share their earnings with the other spouse. Insolvency does not release the business owner from their child support/alimony obligations however, this person must look for other gainful employment.

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What is your top tip for business owners?

Definitely seek advice – ideally before the marriage and/or starting the business. When everything is explained, it gives you the certainty that, even in the event of a divorce, you can continue your business activities. Experience shows: the more you talk about these issues up front, the less conflict there will be in the event of a divorce. And this benefits all parties.

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Carole Herzog
Specialist attorney SAV in family law

Pension consulting for private individuals

On the basis of an individual pension analysis, we show you how you can plan your retirement provision at an early stage and fill any gaps in your provision. So that you can look forward to the third stage of your life with confidence.

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