How divorce hits finances

When Aditi Singh decided to part ways with her husband over a decade ago, division of finances and property was the last thing on her mind. As a result, she failed to get a share of what was rightfully hers. However, Singh is hardly alone in not understanding what is rightfully hers to keep when a marriage falls apart.

During divorce proceedings, overriding emotions can lead to a skewed division of assets. The losers are often women, especially those who do not take part in making financial decisions during the marriage or are ignorant of their rights.

Know your rights


The law says any investments made in the name of the woman will be a part of her wealth in the event of divorce. Earlier, the woman would be the sole beneficiary of such an investment under the Prevention of Benami Property Act. Now, after a recent Delhi HC order on the Benami Act, a purchase made by the husband from his known sources of income in his wife’s name will no longer be considered benami and he can claim a share in it. But, any gift received by the woman at the time of marriage and during the time she remains married is her property. This is known as streedhan.

Alimony and maintenance


Besides streedhan, a woman is also entitled to alimony. Mrunalini Deshmukh, a Mumbai-based lawyer says the court decides the alimony amount after considering the wife’s working status and family’s overall financial status. She adds that alimony should not be confused with child support. Take the case of Chennai-based Sandhya Natarajan, who got custody of her son after divorce. She did not demand alimony for herself hoping to get maintenance for her son although she qualified for both as her salary was very little compared to her husband’s and she had no savings. Natarajan did not start a legal fight for what was due to her either as she did not have enough money to engage a lawyer. Deshmukh says in such a situation, the wife can ask for interim maintenance from her husband till the divorce is finalised.

After the divorce


Once the dust settles, it is important for the affected parties to rejig their financial plans. Experts say the first step is to determine the new net income and expenses. At this point, one should not lose sight of long and short-term goals.

Suresh Sadagopan, Founder, Ladder7 Advisories, says building an emergency fund is priority. While most financial goals may change, there could be some goals that may remain entangled with one’s former partner like child’s education or marriage. Experts suggest that it is better to get a lump sum for child support and invest it in proper instruments to avoid any future conflicts.

alimony

Budgeting for the alimony


Alimony can affect the budget of both the parties and their respective tax outgoes. For the receiver, regular alimony may constitute a great portion of the monthly income. So taxes on alimony should be carefully understood to estimate the net cash flow.

In a one-time settlement, the lump sum can feel like a windfall. Experts suggest that lump sum alimony is better than regular payouts as the the lump sum can be utilised better for future needs. For the spouse paying regular alimony, no deductions can be claimed on it.

What is streedhan


What belongs to her


• Jewellery (gold, silver, precious/semi-precious stones, alloy), property and valuables like car, paintings, artifacts, furniture etc gifted to the woman at marriage, before marriage and during the course of her marriage. During dispute, a list of all the items signed by two witnesses can be given to make a claim

• Gifts can come from anyone—husband, in-laws, parents, friends, relatives etc

• Woman’s earnings before or after marriage from employment or business. Any savings or investments made from her earnings

What does not belong to her


• Ornaments like a gold chain or ring, and other valuables gifted to the husband by the wife’s parents at the time of marriage and through the duration of marriage

• Any movable or immovable asset bought by the husband in the wife’s name without passing it on as a gift

• Earnings of the woman spent on household cannot be claimed back

Some names have been changed to protect identities

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