However complicated and exhausting the entire process of divorce is, one cannot ignore the financial impact it will have on one’s future
Divorce is one of the most monumental events in anyone’s lifetime and an extremely difficult one at that. Notwithstanding the emotional stress that it may cause, it also has serious implications on the finances of the stakeholders. While family and friends can only extend emotional help, the financial solution usually requires expert support. However, no matter how complicated and exhausting the entire process might get, one cannot ignore the financial impact. We’ve discussed a few crucial financial steps that shouldn’t be overlooked at any cost when going through a divorce.
Financial rights on alimony and maintenance
While financial matters often take a backseat in such a situation, they still need to be factored in. Equally important is to know your financial rights. For example, any gift received by the wife during the tenure of the marriage, including those given by the husband or his family, is her property and cannot be claimed by the husband. However, if there’s a dispute, the court may ask for a proof, so you may require a gift deed to claim them.
Getting alimony, which is the financial compensation granted to a spouse who is unable to sustain himself/herself after a divorce, is also your right. Assuming that the husband would be liable to pay the alimony, the amount is ascertained by evaluating the financial status of the woman’s family, her career prospects and earning potential and the value of her overall financial assets like savings, gifts, property, etc., among other things.
Alimony can be a one-time payment. A one-time lump sum payment may look great, but considering the uncertainty of life, this must be thought through, especially if you do not have any other source of income. The advantage, however, is that a one-time alimony payment prevents further interaction with your ex-spouse on financial matters, especially when the relationship has been irreparably damaged.
That said, in some cases, the court may allow monthly maintenance apart from the alimony. If the wife is going to take custody of children after the divorce, the husband has to pay for their education and their other needs. However, if the wife has her own income, the amount can be reduced accordingly.
Review your finances
You must revisit your financial goals after the divorce proceedings. For a husband, who has to pay alimony and maintenance, the expenses will rise considerably which will impact at least his short-term goals. As such, take a good hard look at your financial goals and make adjustments in your financial strategies. The same rule applies to a wife, especially if she has no other source of income apart from the alimony and maintenance. She will have to control her expenses until she finds a new job, make a budget and stick to it.
If she’s already an earning individual, she must start planning on how she’s going to use the money. The best idea is to set short and long-term financial goals for herself and her dependents, and chalk out a plan to channelise her savings and investment returns to meet the goals in time.
Revisit the property details
Unlike in Western countries where there is a concept of marital assets, which means the assets are shared equally between the husband and the wife, India doesn’t have a well-defined law on the same. The property or asset belongs to the one that pays for it. So, unless the wife’s name is there in the property as a co-owner, she will not be able to claim it. Similarly, if the wife has paid for the property or it is in her name, the husband will not have any say over it. So, handle the property papers with care. If both the spouses are joint holders, it has to be settled according to their share mentioned in the agreement and the contribution made by each member. If they fail to settle this mutually, it will be decided by the court.
Change the nominee details
Spouses give each other’s name as nominees in almost all financial transactions and accounts.Make sure that the ex-spouse’s name is deleted from all accounts – bank accounts, demat account, investments, property, etc. Any laxity in this can financially harm your dependents in the future. The requirement to change the nomination applies to insurance too.
The author is CEO, BankBazaar.com