Financial impact of a divorce in Singapore

NAV TL;DR

If you don’t have time to read through the whole article, you can check out a summary below:

• Getting a divorce can have a real financial impact on your life.
• Many people have the perception that splitting matrimonial assets means a straightforward 50-50 split between the couple, but this is most likely not the case.
• To protect your assets, it is prudent to keep track of major matrimonial assets and your contributions to them.

Data from the Ministry of Social and Family Development (MSF) showed that a bigger percentage of married couples here are breaking up. Marital break-ups were also reported elsewhere around the world, particularly in the wake of the Covid-19 pandemic. Stress from having to juggle both career advancement and family needs from the common dual-income family, caring for young children and perhaps the financial and emotional stress of being the sandwich generation could have also impacted the length of marriage.

Getting through a divorce can be tough and not just emotionally. Many worry about the financial impact on their lives following a divorce. Some of the top concerns include how matrimonial assets will be divided, cost of the divorce and the provision of maintenance fees for their spouse and children.

While all this can feel overwhelming, arming yourself with knowledge and preparation can help you to protect your assets and start a new chapter of your life on the right foot.

Here is a brief overview of common financial issues involved in a divorce in Singapore:

Cost of a divorce

In Singapore, the cost involved in a divorce depends on whether it is amicable or a contested divorce. Simplified uncontested divorces are generally more straightforward and cost from $1,500 to $3,500. Contested divorce, where spouses are contesting for at least one term of the divorce, comes at a higher cost ranging between $10,000 and $35,000. Please note that all fees stated are estimates and will vary among different lawyers.

Division of matrimonial assets

The division of matrimonial assets during a divorce is often a hotly contested issue since it can have a long-term impact on one’s standard of living. In Singapore, matrimonial assets include:

1. Assets acquired by one or both parties during the marriage
2. Assets used by one or both parties and their children for various purposes
3. Assets acquired before the marriage but substantially improved in quality during the marriage

Some examples of matrimonial assets include the family car, matrimonial home, savings, cash balance in the couple’s Central Provident Fund (CPF) accounts, businesses, and jewellery.

Many people have the perception that splitting matrimonial assets means a straightforward split of 50-50 between the couple, but this is most likely not the case. There are many factors for the court to consider, which include:

• The extent of financial contributions towards these assets by each party
• The extent of non-financial contributions towards the welfare of the family, such as caregiving duties and the giving up of potential career opportunities for the family
• Needs of the child/children
• Pre-nuptial agreements if any
• Length of marriage
• Debt owed by each party
• The financial circumstances of each party

There is thus, no standard approach to this matter and will be determined on a case-by-case basis.

To protect your assets, it is prudent to keep track of major matrimonial assets and your contributions to them. For instance, if you are the one paying for your child’s preschool fees, producing bank statements of the monthly deductions from your account will help to show your part of the contribution to the family.

Matrimonial home

The matrimonial home probably forms the largest part of you and your partner’s assets. Depending on whether it is a HDB or private property, couples have a few ways to divide the matrimonial home.

If the couple agrees, they can transfer their interest in the flat to the other spouse, sell the flat/apartment and have the proceeds divided between the parties in a certain proportion. Again, it is important to have proof of your contribution, so using CPF savings in this case is probably the best way. If you have paid for the home renovations on your part, it would be wise to keep the receipt to prove your contribution to the matrimonial home.

It is important to note that the matrimonial home will need to fulfil the criteria under what is considered a matrimonial asset. If the HDB flat is acquired before marriage via a gift from a family member or inherited from one spouse’s mother after she passed on, it may not be considered a matrimonial asset.

If you have been assigned to retain the HDB flat, you’d also need to fulfil HDB’s eligibility conditions to keep it. You will have to fall within one of these 2 situations:

Situation 1: You have care and control of your children and have the financial capability to take on the home loan for the flat.

Situation 2: You are eligible under the Single Singapore Citizen Scheme.

Spousal and child maintenance fees

In Singapore, the right for maintenance is found within the Women’s Charter. Previously, maintenance is only given to the wife but in recent years, changes have been made to include a narrow exception for husbands who are unable to support themselves because of a disability.

The court will look at the facts and determine whether the party seeking maintenance has such a need, as well as the appropriate amount of maintenance. A potential area of dispute in spousal maintenance stems from what is considered “reasonable expenses”.

In the same vein, child maintenance will have to be paid because every parent is under a legal duty to maintain their child until he or she turns 21 years old. You can apply for child maintenance from your spouse if you are the legal guardian or has custody of the child. There is no set formula for determining how much spousal or child maintenance should be paid. Some the factors that the court will consider, include:

• The salary and earning potential of each party in the past, present and future
• The financial needs and obligations of each party/child in the future
• The standard of living of each party before the marriage broke down
• Any direct and indirect contributions made by each party to the household
• The length of the marriage

An important tip for those seeking spousal maintenance is that you should always push for at least a nominal maintenance fee. This ensures that you still have an option of applying for an increase in maintenance in the future, should the need arise. If the judge does not grant any maintenance at all, there will be no possibility of obtaining maintenance subsequently.

While nobody goes into a marriage expecting to go separate ways, divorce may be a necessary evil when the marriage cannot be saved. With our finances entangled within the marriage, it can cause a real financial impact if the marriage must be dissolved.

Because of the emotional aspect of a divorce, it is better to end amicably rather than drag out the process and prolong the hurt for all involved parties (as well as for your wallet). Arming yourself with the knowledge of how a divorce can impact you financially can help you make the right decisions to accelerate the process and hopefully reduce the emotional and financial pain for everyone.

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This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.