Getting A Divorce Without Losing Her Home

Source : The Sunday Times, March 2, 2008

Recent CPF changes allow for a more eqitable distribution of the matrimonial home and let the ex-wife keep a roof over her head.

DIVORCING couples come under even greater emotional strain when they try to sort out who gets what.

Last October, measures were put in place that tilt the balance towards divorced women who would otherwise get little from the sale of the matrimonial home - or could even lose the roof over their heads.

Under the revised Central Provident Fund (CPF) rules, retirement funds will be distributed more equitably when coupples split their matrimonial property .

In a nutshell, the changes allow CPF assets such as property or unit trusts, or sale proceeds from these assets, to be transferred immediately to the ex-spouse’s account.

Most Singaporeans use CPF monies to buy the matrimonial home. In some cases, the husband is more willing to transfer it to his former wife, says lawyer Amolat Singh of Amolat Singh & Partners, especially if she can show she’s entitled to a big share.

CPF rules

The old system

The property could not be transferred to the wife until and unless all the monies used by her ex-husband for the mortgage had been fully reimbursed into his CPF account, together with the accrued interest.

Often, the parties did not have the funds to do so, so they were left with no choice but to sell the flat.

This could place them in financial straits, especially if they’d paid a high price for the home. Also, the spouse with the kids would probably have to find alternative accommodation.

This was what happened to Madam Shirley Chong (not her real name), who downgraded to a three-room flat from a four-roomer. Her two kids had to move to a new school as well.

The court had ruled that the flat should go to her, but she did not have the money to make the reimbursement, so the transfer could not take place. The flat was sold and a charge placed on her ex-husband’s account.

He is not yet 55 years old and it remains to be seen whether she will get her money when he reaches that age, as a mandatory Minimum Sum has to be retained in his CPF account.

The new system

The property can be transferred immediately from one spouse to the other even if the funds have not been fully reimbursed into the CPF account.

A charge is placed on the account so as to secure the refund of the CPF monies in the event of a sale.

If the wife sells the property , she must make a reimbursement equivalent to the total amount of the CPF monies used by her ex-husband, into her own CPF account.

This ensures that there is no leakage of funds from the CPF system.

The refund is just postponed until there is a sale, and the refund or reimbursement is made into her own account.

Madam Chong would be far better off under the new rules as the court could order an immediate transfer of the flat to her with or without a reimbursement.

Here are three real-life cases where divorced couples have benefited from the new rules.

Couples who have benefited

Case 1

MARRIED for six years, Mr and Mrs Victor Lee (not their real names) bought a three-room HDB flat now worth $200,000 on the resale market. He owed her $9,000 for maintenance in arrears.

Finally, they divided the flat in such a way that she took over his share by paying $60,000 into his CPF account. This represented the CPF monies he had withdrawn to buy the flat, plus accrued interest, less the debt of $9,000.

Said Ms Lie Chin Chin, the managing director of law firm Characterist: ‘Without the revised ruling, the $9,000 would have remained an outstanding debt. This ruling permits a partial refund of CPF monies into the ex-husband’s account, so Mrs Lee managed to offset the debt with the sum that was supposed to be refunded into his CPF account.’

When she sells the flat, however, she is required to refund any CPF monies she used for the property , plus the sum of $9,000, into her CPF account.

Case 2

AFTER 10 years of marriage, Mr and Mrs David Lim (not their real names) called it quits. At the point of divorce, she had no income and was thus unable to secure a housing loan. She had custody of a child and they needed a roof over their heads.

The Lims agreed that he would transfer his share in their five-room flat worth $400,000 to her without making any refunds into his CPF account. She managed to take over the flat in her sole name and continued living there with her child.

Without the revised CPF ruling, the division of the matrimonial flat could have posed a financial burden. The flat would have had to be sold or she would have had to take it over.

If the flat had been sold, most of the proceeds would have been refunded into his CPF account. There would have been little cash left over to be distributed. She would not have had the funds to buy another flat.

If she had taken over the flat, she would have had to get a loan so she could refund the monies into his CPF account. But she had no income, so her chances of getting a loan would have been practically non-existent.

Case 3

WHEN Mr and Mrs Joseph Ang (not their real names) bought their matrimonial home for $550,000 more than 10 years ago, they put in equal contributions using CPF monies.

The property is now worth $1.8 million. She paid for the renovation costs of $450,000.

They agreed to divide the house 80:20 in her favour. This meant he should receive $360,000.

But the sum due to be refunded into his CPF account was about $420,000 as the refund had to include the accrued interest on the CPF monies used. They agreed that she would take over his share by paying only $360,000 into his account.

Court order needed

Lawyers point out that the new CPF rules do not automatically apply in all divorce cases. A court order must first be made.

The onus is on the court to explicitly state that one spouse can transfer his or her share of the property to the other without having to refund the monies used. Only then can the transfer take place.

If the court does not make such an order, and it is purely the couple’s decision to buy over each other’s share of the property , the old rules still apply. The transaction must be done at fair market value and the monies must go back to the respective CPF accounts.

Dividing the assets

IN DECIDING who gets what, the law requires any division of matrimonial assets to be just and equitable.

Courts weigh certain factors when determining how assets should be split.

Matrimonial home

Contribution of each spouse: The starting point is the financial contribution that each party has made to initial payments and monthly mortgage payments.

Any payments made through the Central Provident Fund are also taken into account, said lawyer Amolat Singh.

Non-financial contributions: The court looks at who paid for the renovations; who bought the furniture, fittings or furnishings; who settled the monthly maintenance charges; and who paid the utility bills.

Also covered are expenses incurred for the welfare of the family and while looking after children or an aged or disabled family member.

Other assets

Efforts and contributions made by each party towards their acquisition: For example, for a business, the party making a claim must prove he or she has contributed to its success. One way is to show he or she has been involved in its administration or operations.

The court might not divide up these assets in the same proportion that it would the matrimonial home. For instance, the home might be split 50:50, but not the other assets.

Other factors: The court will consider the length of the marriage, the age and health of each spouse, and the couple’s standard of living during the marriage.