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When untying the marriage knot

LiveMint logoLiveMint 15-03-2017 Priya Sunder

An Indian man in Mizoram has 39 wives, 94 children and 33 grandchildren. The human who will live to 150 years is already born. Donald Trump is President of the United States. Truth is sometimes stranger than fiction. 

X, a homemaker, was married to a businessman for nearly a decade. The couple has two young children. 

Here is where the bizarre begins. X returned home unexpectedly from travel one day and found her husband wearing her nightdress. His mouth was smeared with her fuchsia pink lipstick. He confessed he had a boyfriend. X fainted. When she regained consciousness, she demanded a divorce. There was a finality in her tone which conveyed there was no room for negotiation or reconsideration. “The truth is liberating,” she confessed later. “I wanted a fresh start.” 

Divorce is unsettling for most people. The only difference between X and most other women going through divorce was that the recent events didn’t overpower her. She didn’t blame anyone. All she wanted was to stay in control, focus on the future and make the right decisions. 

The overarching priority for women going through divorce is the desire to cut loose as quickly as possible, particularly in contentious divorces. They are, therefore, even willing to compromise on the settlement. Getting the money issue dealt with is critical. You have only one shot at this and you need to hit bullseye the first time. Keep these points in mind while deciding a settlement. 

Draw up a list of income and assets: The law will generally strives to ensure each partner is treated fairly. But only if you know what you have can you fight for what is rightfully yours. Being ignorant of income, assets and taxes makes you financially vulnerable. Income sources would include business income, salary, interest, dividend, rent, and others. Your financial assets would include bank accounts, fixed deposits, mutual funds, stocks, bonds, retirals such as provident fund, gratuity and superannuation. Joint accounts can be tricky as either party can withdraw the entire deposit on a single day, leaving the other with nothing. Non-financial assets would include real estate and other valuable physical assets such as gold, antiques, paintings and vehicles. 

Put together a file of your various assets, property deeds, bank and credit card statements, insurance policies, tax returns, loans, financial statements, with the current values against each. Check the mode of holding across all assets—single, joint, either or survivor. If you have inherited property, list that as well. You may have a fair chance of retaining that entire asset. Speak to your accountant or financial adviser to determine the tax implication of the settlement, including alimonies. 

Determine liabilities: It stands to reason that if you are splitting assets, you must also split debt, including all credit card, home, vehicle, and personal loans; even those loans that you owe to family. If you intend to keep property, find out if there are outstanding loans against it. If you want a loan-free asset, ensure your partner refinances the mortgage where you are not a co-signee. It is prudent to clear out loans before the division of assets. If you are the co-signee on any of your partner’s loans, you could find yourself in troubled waters long after the divorce, or get a bad rap on your credit score if either of you defaults. This can impact future loans you may want to avail. If loans cannot be closed out, ensure that the settlement addresses a repayment schedule. 

Division of assets: There is no fixed formula while dividing the assets. However, knowing what you need to be financially secure is half the battle won. Based on future goals, a financial planner can help determine an amount that is fair. Part of this settlement can come through regular alimony and part through assets. I would prefer more to be paid upfront to avoid hassles of legal recourse if regular payments become sporadic. Women tend to settle for physical assets such a property at the cost of liquidity. Once the divorce comes through, they will need funds for living expenses. The monthly maintenance may not support their earlier lifestyle. Don’t always choose the house over financial assets. Getting a house worth a few crores may seem enticing, but remember you will incur maintenance costs, property taxes, utility costs and capital gains tax when you sell it. Renting a home is not a bad option if it allows you greater liquidity. 

Secure future goals and insurance: You must ensure children’s expenses and educational needs are factored into the settlement. Education inflation is high and future cost of these expenses must be calculated and investments made accordingly. If existing assets are inadequate, regular investments need to be made till the time the assets are built up. The gap between existing assets and future investments must be covered by insurance. Make a Will, if you haven’t already. If you have one, then change it to reflect your current wishes. Change nominations on all your assets—insurance, demat or bank accounts, provident funds, mutual funds, etc. If both partners have been under a family medical cover, they must purchase separate medical covers and ensure the children are covered too. 

Women need to fight for what is rightfully theirs. They must think through their head, not their gut. Professional expertise of lawyers and financial advisers is crucial at this point. The cost of counsel should not overshadow critical decisions that impact the long-term future. 

More importantly, women need to bury the past, and move on with their lives. They should refocus on their careers or develop a vocation that will give financial satisfaction, boost self-esteem and fill the vacuum in their lives. They now have a chance to write a book about a new life. Start with the first chapter. Who knows, this book could end with a ‘happily ever after’. 

Priya Sunder is director and co-founder of PeakAlpha Investments.

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