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29-05-2011, 07:23 AM
May 29, 2011
HEADING FOR SPLITSVILLE?
Breaking up is hard to do
Senior Correspondent Lorna Tan finds out how matrimonial assets are divided in a divorce
In both good times and bad, the divorce rate in Singapore has kept rising in recent years. The latest official figures show that the number of divorces crept up from 7,216 in 2008 to 7,386 in 2009.
Couples who have parted company usually learn that amid all the emotional upheaval, it pays to be financially savvy in order to protect themselves. Unfortunately, some learn this the hard way.
Lawyer Amolat Singh of Amolat and Partners cited the example of Ms Mary Loh (not her real name), 42, who was divorced. She has a vague idea that her husband, who supplies paints, had started two businesses with his brothers to undertake painting jobs and make furniture. She also suspected that he had bought a house in Malaysia.
But she was unable to provide any details and her husband denied everything flatly. He might have hidden his other businesses under other relatives' or friends' names in anticipation of divorce proceedings. But in the absence of evidence, Ms Loh was unable to prove that he was worth more than what he was prepared to admit.
This illustrates that it is important to get the facts straight and set out clearly what is rightfully yours in a marriage, said financial experts. In the event of a divorce, particularly when it is unexpected, the emotional distress can overwhelm you and make you lose sight of practical issues. In a worst-case scenario, you may end up losing more of your assets than you deserve to lose.
You should take note that pre-nuptial agreements are still not recognised unless they are contracted in a country that recognises such contracts. Besides, it is not in our culture for most of us to rely on such agreements.
That means we have only ourselves and our financial know-how to depend on.
Mr Lee Terk Yang, director of legal firm Characterist, observed that many people wrongly assume that division of matrimonial assets means a straightforward split down the middle of the total assets.
'Similarly, many women wrongly assume that once married, they are automatically entitled to half of their husband's assets,' he said. However, there is no standard formula used by the courts to divide matrimonial assets as there are different factors at play in each case.
For a start, we need to know what the court will consider to be matrimonial assets and how they can potentially be split.
In Section 112 (10) of the Women's Charter, matrimonial assets are defined as any asset acquired before the marriage by one party or both parties, used or enjoyed by both parties or their children, or which have been substantially improved during the marriage by the other party or both parties.
For instance, a wife who assists in her husband's business, even though he may have started it before the marriage, may claim a share if she can show that she played an active part in expanding the business, such as actively marketing the products or attending and hosting business-related entertainment events.
Likewise, adding a garden or swimming pool to the property would also count as a substantial contribution, said Mr Singh.
Matrimonial assets also include assets acquired during the marriage, but do not include any asset acquired by one party at any time by way of a gift or inheritance which has not been substantially improved during the marriage.
The court has the discretion to order the division or sale of any matrimonial asset and the division of the sale proceeds between the parties, in proportions that the court deems just and equitable in the circumstances of each case. This includes taking into account one's contribution in labour and effort to the marriage.
Here are some things you should know when contemplating a divorce.
1 Divorce as the last resort
Seek marriage counselling first before deciding to go your separate ways, said Mr Koh Tien Hua, partner at law firm Harry Elias Partnership. Consider the effect of a divorce on your life and your financial circumstances.
You may also want to speak candidly with your children to prepare them on the impending changes that come with a divorce.
2 Share ownership of property
Ensure that the property is held in the proper and equitable manner. This is because if it is a joint tenancy - as opposed to a tenancy-in-common - then when a spouse dies before the division of property is made by the court on divorce, the survivor will automatically become the sole owner of the property.
Mr Singh said that if the property is held on a joint tenancy, it is possible to do a severance which converts it into a tenancy-in-common. But if it is severed without the other spouse's consent, the ownership is presumed to be held in equal shares.
If the joint tenancy is severed with the other party's consent, then it is open to the parties to stipulate their respective shares in proportion to their contributions.
For example, Mr Robert Lim (not his real name), 55, owned a private landed property with his wife as joint tenants. In the midst of divorce proceedings, Mr Lim was suddenly diagnosed with cancer. He underwent treatment but he constantly worried that if he died before the court ruled on the division of his property, his wife would get everything.
Eventually, he decided to sever the joint tenancy and it became a tenancy-in-common with each party holding a half share. Even though he paid much more than his wife for the property, he was relieved that he was able to plough back at least half of it should he pass on because of his life-threatening cancer. By doing so, he is then at liberty to leave his share to his beneficiaries in his will.
3 Property type
If your matrimonial home is an HDB flat, an important consideration for parties involved would be whether the flat is still subject to the requirement of a minimum occupation period as imposed by the HDB, said Mr Lee.
This is because the flat will have to be surrendered to the HDB if neither party is able to retain it or if parties are not eligible to sell the flat on the open market.
'Very often, this may affect a party's decision not to commence divorce proceedings as he is not prepared to suffer any losses arising from the surrender of the said HDB flat,' said Mr Lee.
In such a situation, the couple may be 'forced' to stick it out and try to make things work, or they may opt to enter into a Deed of Separation in order to allow both parties to lead their own lives.
4 Keep track of matrimonial assets
Make it a point to know as much as possible about your spouse's sources of income, business or work. For your spouse to divulge every financial asset, you may need to provide some specific information and conduct the right searches.
In a recent case of divorce settlement, a Hungarian woman won $3.25 million in a settlement from her Canadian ex-husband who was found by the court to have underdeclared about $13 million in shares and benefits and was ordered to pay up.
Lawyer Suchitra Ragupathy of Rodyk and Davidson, who handled the case, said that the couple are both Singapore permanent residents and it was the husband who filed for divorce.
The couple agreed to split up with the understanding that each would receive 50 per cent of their share of matrimonial assets. That was in 2003. About a year later, the husband, who was managing director of a commodities firm, received stock options and benefits totalling about $13 million from a company buyout.
Rodyk and Davidson raised the position that the brokering of the sale of the firm was prior to the couple's split. The husband would therefore have an obligation to disclose the stock option as there was a likelihood that he would be receiving it in the foreseeable future. The court awarded the wife 25 per cent of the benefits that came with the firm buyout. That amounted to $3.25 million.
5 Custody of children
Some people believe that custody refers to the physical custody of the child. Based on this misperception, many parents fight tooth-and-nail thinking that if they are not given custody, they will eventually lose their child, noted Mr Singh.
'This is untrue because custody is a legal concept and includes the right of a parent to make decisions affecting the child,' he said.
In fact, the paramount consideration is the welfare of the child. 'The court will consider the wishes of the parent and of the child, if he is older. But the overriding consideration is still the child's welfare,' said Ms Ang Kim Lan from Goodwins Law Corp.
The parent with whom the child lives day-to-day is said to have 'care and control' of the child. This parent makes the day-to-day routine or mundane decisions for the child but cannot act unilaterally in important and major decisions. The parent without 'care and control' would have access rights.
For some time now, the courts have always awarded joint custody so that both parents continue to be involved in the child's life as opposed to sole custody, where one parent alone makes all the decisions for the child and the other parent is virtually excluded.
6 Insurance policies
If you had named your spouse or children as beneficiaries of a life policy bought on your life prior to September 2009, you have created an irrevocable trust.
This means you cannot unilaterally terminate or surrender the policy after divorce. Ms Ang said the best time to handle this is during the divorce proceedings when both parties are negotiating how matrimonial assets are to be split up. If your spouse is the named beneficiary, then get his or her consent to terminate the trust and reassign it back if so required, she added.
7 Legal advice and costs
Seeking proper legal advice should always be a basic step, as relying on hearsay stories from relatives and friends is misleading, said Mr Lee.
If you do not think you can afford a lawyer, you may apply for legal aid at the Legal Aid Bureau. But a means and merits test must be satisfied before legal aid is granted.
Mr Koh advised that the legal cost of a divorce depends on the complexity of the issues, the number of man-hours spent and the seniority of counsel. Some lawyers charge by the hour and some offer package deals. The cost can vary from $3,000 to more than $80,000, especially for heavily contested divorces.
lorna@sph.com.sg
HEADING FOR SPLITSVILLE?
Breaking up is hard to do
Senior Correspondent Lorna Tan finds out how matrimonial assets are divided in a divorce
In both good times and bad, the divorce rate in Singapore has kept rising in recent years. The latest official figures show that the number of divorces crept up from 7,216 in 2008 to 7,386 in 2009.
Couples who have parted company usually learn that amid all the emotional upheaval, it pays to be financially savvy in order to protect themselves. Unfortunately, some learn this the hard way.
Lawyer Amolat Singh of Amolat and Partners cited the example of Ms Mary Loh (not her real name), 42, who was divorced. She has a vague idea that her husband, who supplies paints, had started two businesses with his brothers to undertake painting jobs and make furniture. She also suspected that he had bought a house in Malaysia.
But she was unable to provide any details and her husband denied everything flatly. He might have hidden his other businesses under other relatives' or friends' names in anticipation of divorce proceedings. But in the absence of evidence, Ms Loh was unable to prove that he was worth more than what he was prepared to admit.
This illustrates that it is important to get the facts straight and set out clearly what is rightfully yours in a marriage, said financial experts. In the event of a divorce, particularly when it is unexpected, the emotional distress can overwhelm you and make you lose sight of practical issues. In a worst-case scenario, you may end up losing more of your assets than you deserve to lose.
You should take note that pre-nuptial agreements are still not recognised unless they are contracted in a country that recognises such contracts. Besides, it is not in our culture for most of us to rely on such agreements.
That means we have only ourselves and our financial know-how to depend on.
Mr Lee Terk Yang, director of legal firm Characterist, observed that many people wrongly assume that division of matrimonial assets means a straightforward split down the middle of the total assets.
'Similarly, many women wrongly assume that once married, they are automatically entitled to half of their husband's assets,' he said. However, there is no standard formula used by the courts to divide matrimonial assets as there are different factors at play in each case.
For a start, we need to know what the court will consider to be matrimonial assets and how they can potentially be split.
In Section 112 (10) of the Women's Charter, matrimonial assets are defined as any asset acquired before the marriage by one party or both parties, used or enjoyed by both parties or their children, or which have been substantially improved during the marriage by the other party or both parties.
For instance, a wife who assists in her husband's business, even though he may have started it before the marriage, may claim a share if she can show that she played an active part in expanding the business, such as actively marketing the products or attending and hosting business-related entertainment events.
Likewise, adding a garden or swimming pool to the property would also count as a substantial contribution, said Mr Singh.
Matrimonial assets also include assets acquired during the marriage, but do not include any asset acquired by one party at any time by way of a gift or inheritance which has not been substantially improved during the marriage.
The court has the discretion to order the division or sale of any matrimonial asset and the division of the sale proceeds between the parties, in proportions that the court deems just and equitable in the circumstances of each case. This includes taking into account one's contribution in labour and effort to the marriage.
Here are some things you should know when contemplating a divorce.
1 Divorce as the last resort
Seek marriage counselling first before deciding to go your separate ways, said Mr Koh Tien Hua, partner at law firm Harry Elias Partnership. Consider the effect of a divorce on your life and your financial circumstances.
You may also want to speak candidly with your children to prepare them on the impending changes that come with a divorce.
2 Share ownership of property
Ensure that the property is held in the proper and equitable manner. This is because if it is a joint tenancy - as opposed to a tenancy-in-common - then when a spouse dies before the division of property is made by the court on divorce, the survivor will automatically become the sole owner of the property.
Mr Singh said that if the property is held on a joint tenancy, it is possible to do a severance which converts it into a tenancy-in-common. But if it is severed without the other spouse's consent, the ownership is presumed to be held in equal shares.
If the joint tenancy is severed with the other party's consent, then it is open to the parties to stipulate their respective shares in proportion to their contributions.
For example, Mr Robert Lim (not his real name), 55, owned a private landed property with his wife as joint tenants. In the midst of divorce proceedings, Mr Lim was suddenly diagnosed with cancer. He underwent treatment but he constantly worried that if he died before the court ruled on the division of his property, his wife would get everything.
Eventually, he decided to sever the joint tenancy and it became a tenancy-in-common with each party holding a half share. Even though he paid much more than his wife for the property, he was relieved that he was able to plough back at least half of it should he pass on because of his life-threatening cancer. By doing so, he is then at liberty to leave his share to his beneficiaries in his will.
3 Property type
If your matrimonial home is an HDB flat, an important consideration for parties involved would be whether the flat is still subject to the requirement of a minimum occupation period as imposed by the HDB, said Mr Lee.
This is because the flat will have to be surrendered to the HDB if neither party is able to retain it or if parties are not eligible to sell the flat on the open market.
'Very often, this may affect a party's decision not to commence divorce proceedings as he is not prepared to suffer any losses arising from the surrender of the said HDB flat,' said Mr Lee.
In such a situation, the couple may be 'forced' to stick it out and try to make things work, or they may opt to enter into a Deed of Separation in order to allow both parties to lead their own lives.
4 Keep track of matrimonial assets
Make it a point to know as much as possible about your spouse's sources of income, business or work. For your spouse to divulge every financial asset, you may need to provide some specific information and conduct the right searches.
In a recent case of divorce settlement, a Hungarian woman won $3.25 million in a settlement from her Canadian ex-husband who was found by the court to have underdeclared about $13 million in shares and benefits and was ordered to pay up.
Lawyer Suchitra Ragupathy of Rodyk and Davidson, who handled the case, said that the couple are both Singapore permanent residents and it was the husband who filed for divorce.
The couple agreed to split up with the understanding that each would receive 50 per cent of their share of matrimonial assets. That was in 2003. About a year later, the husband, who was managing director of a commodities firm, received stock options and benefits totalling about $13 million from a company buyout.
Rodyk and Davidson raised the position that the brokering of the sale of the firm was prior to the couple's split. The husband would therefore have an obligation to disclose the stock option as there was a likelihood that he would be receiving it in the foreseeable future. The court awarded the wife 25 per cent of the benefits that came with the firm buyout. That amounted to $3.25 million.
5 Custody of children
Some people believe that custody refers to the physical custody of the child. Based on this misperception, many parents fight tooth-and-nail thinking that if they are not given custody, they will eventually lose their child, noted Mr Singh.
'This is untrue because custody is a legal concept and includes the right of a parent to make decisions affecting the child,' he said.
In fact, the paramount consideration is the welfare of the child. 'The court will consider the wishes of the parent and of the child, if he is older. But the overriding consideration is still the child's welfare,' said Ms Ang Kim Lan from Goodwins Law Corp.
The parent with whom the child lives day-to-day is said to have 'care and control' of the child. This parent makes the day-to-day routine or mundane decisions for the child but cannot act unilaterally in important and major decisions. The parent without 'care and control' would have access rights.
For some time now, the courts have always awarded joint custody so that both parents continue to be involved in the child's life as opposed to sole custody, where one parent alone makes all the decisions for the child and the other parent is virtually excluded.
6 Insurance policies
If you had named your spouse or children as beneficiaries of a life policy bought on your life prior to September 2009, you have created an irrevocable trust.
This means you cannot unilaterally terminate or surrender the policy after divorce. Ms Ang said the best time to handle this is during the divorce proceedings when both parties are negotiating how matrimonial assets are to be split up. If your spouse is the named beneficiary, then get his or her consent to terminate the trust and reassign it back if so required, she added.
7 Legal advice and costs
Seeking proper legal advice should always be a basic step, as relying on hearsay stories from relatives and friends is misleading, said Mr Lee.
If you do not think you can afford a lawyer, you may apply for legal aid at the Legal Aid Bureau. But a means and merits test must be satisfied before legal aid is granted.
Mr Koh advised that the legal cost of a divorce depends on the complexity of the issues, the number of man-hours spent and the seniority of counsel. Some lawyers charge by the hour and some offer package deals. The cost can vary from $3,000 to more than $80,000, especially for heavily contested divorces.
lorna@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/