Protecting Your Assets In Case Of A Divorce
It is common to see a divorcing couple being unable to agree on how their assets should be split post-marriage, with differing accounts on how big-ticket items were financed before and during the marriage. This results in long, drawn-out court cases over the division of matrimonial assets, bringing much unhappiness to both parties and the people around them.
In this article, we aim to give an insight as to how both parties’ assets are split and divided post-marriage. Should you be looking to get married in the future or are currently married, this article aims to help you better understand the importance of forward planning, and what you should do now or avoid doing, in order to ensure that you obtain the best outcome for yourself in the unfortunate event of a breakdown of your marriage.
The division of a couple’s assets is generally done via two stages.
1. Stage 1: Firstly, all their assets are split into two categories: matrimonial assets (forming the “matrimonial pool”) or non-matrimonial assets.
2. Stage 2: Then, the assets in the matrimonial pool are divided amongst husband and wife according to a ratio / percentage determined by the Family Justice Courts.
In this article, we will be focusing on the first stage, the splitting of a couple’s assets into the matrimonial pool and the non-matrimonial pool.
To begin with, it is worth understanding that all assets (whether they are matrimonial assets or not) can be split into four classes of assets1
1. Quintessential matrimonial assets;
2. Transformed matrimonial assets;
3. Pre-marriage assets; and
4. Gifts and inherited assets.
One important factor which will be taken into account by the Family Justice Courts when deciding whether an asset goes into the matrimonial pool or not is the time at which it was acquired – whether it was before or after the marriage. However, this factor does not matter for assets categorised as “Gifts and inherited assets”. Thus, to begin with, we will be discussing the class of assets of Gifts and inherited assets.
Gifts and Inherited Assets
Generally, Gifts and Inherited assets will not go into the matrimonial pool, regardless of when these assets were acquired. Exceptions to this rule are if
1. the asset has been substantially improved during the marriage by the other spouse or by both spouses, or
2. it is the matrimonial home.
Substantial improvement
For the non-owner spouse of the asset to substantially improve the asset, he/she must either invest money in it or invest effort which has economic value in it. For the investment of money, the Family Justice Courts have cited a paradigm example to be renovation works performed on a residential or commercial property. An example of an investment of effort which can transform a business into a matrimonial asset is the development of a business by the non-owning spouse or by both spouses during the marriage by sustained efforts.
Let’s illustrate this with a hypothetical example.
Mr and Mrs Tan have been married for 10 years, and have recently decided to get a divorce. During their marriage, Mrs Tan received a gift from her mother, a Cartier luxury watch. Ordinarily, this watch would not form part of the matrimonial pool as it is a gift purely from her mother to Mrs Tan.
However, during their marriage, the watch had stopped working, and Mr Tan brought the watch for repairs and paid for its repairs. Mr Tan had substantially improved the watch during the marriage, and this watch would now form part of the matrimonial pool.
Additionally, Mrs Tan’s father had passed away before she got married, and had left her a residential property located in Orchard Road. The residential property was transferred to Mrs Tan and continues to be registered in her sole name. After getting married, Mr Tan moved in with Mrs Tan into the property, and the couple continued staying there with their children for the rest of their marriage. Despite the Orchard Road property being an asset Mrs Tan inherited from her father and being in her sole name, it would form part of the matrimonial pool as it is now the matrimonial home of the parties.
Moving on to assets acquired otherwise than from gift/inheritance, these assets can be split into 3 categories:
1. Quintessential matrimonial assets;
2. Transformed matrimonial assets; and
3. Pre-marriage assets.
Quintessential Matrimonial Assets
As a start, all quintessential matrimonial assets will form part of the matrimonial pool. Quintessential matrimonial assets refer to:
1. assets which either spouse derived from income earned during the marriage (note: this includes salary earned);
2. assets to which either spouse or both spouses obtained legal title during the marriage by using their own money;
3. any other asset of any nature acquired during the marriage by one party or both parties to the marriage; and
4. the matrimonial home, whenever and however acquired.
Put simply, the matrimonial home and all assets acquired by either spouse/both spouses during the marriage, other than by gift/inheritance, constitute quintessential matrimonial assets, and will form part of the matrimonial pool.
We now move on to consider assets acquired by either spouse before the marriage, which can be divided into transformed matrimonial assets or pre-marriage assets.
Transformed Matrimonial Assets
All transformed matrimonial assets (the whole asset) will form part of the matrimonial pool. Transformed matrimonial assets refer to assets which were acquired before the marriage by either spouse, but which:
1. have been substantially improved during the marriage by the other spouse or by both spouses; or
2. were ordinarily used or enjoyed by both parties or their children while residing together for purposes, such as shelter (e.g. a vacation home), transport (e.g. a car) or household use (e.g. antique furniture in the home).
Let us use the earlier hypothetical example to illustrate.
Before Mr Tan got married, he was already the owner of 2 cars: a BMW X6 Sports Utility Vehicle (“SUV”), and a Porsche 911 Turbo sports car.
After the marriage, the SUV was regularly used to fetch family members around for activities like school, work and family outings. Thus, this SUV would form part of the matrimonial pool as it is a transformed matrimonial asset. This is because even though the SUV had been acquired by Mr Tan before his marriage, it was regularly used by both Mr Tan and Mrs Tan and their children while residing together for transport purposes.
However, the Porsche was generally driven around by Mr Tan only for his own activities during the marriage. Mr Tan does not allow his wife or children to use his Porsche. Mr Tan sends the Porsche for servicing and grooming. Thus, this Porsche would not form part of the matrimonial pool as it was neither substantially improved by Mrs Tan during the marriage, nor was it regularly used by the family.
Pre-Marriage Assets
Lastly, we consider the category of pre-marriage assets. Pre-marriage assets refer to assets that either spouse acquired before the marriage, which were not improved substantially by the non-owning spouse after marriage, nor were used for family purposes.
All pre-marriage assets will not form part of the matrimonial pool, unless they were partially paid for during the marriage by the owning spouse with income that would have been a quintessential matrimonial asset had it been saved up, rather than spent on the pre-marriage asset. In such a case, the asset would form part of the matrimonial pool, usually in the proportion of the value “acquired” or “invested” during the marriage.
Before getting married to Mrs Tan, Mr Tan was already the owner of a small vacation property in Phuket, Thailand.
During the marriage, neither parties nor their children visited the vacation property. Mr Tan however paid yearly maintenance fees from the parties’ joint account to refurbish and to maintain the vacation property as he hopes to sell the property one day for profit. The money used by Mr Tan for maintaining the property came from the parties’ earned income in their joint account. As these maintenance fees would have otherwise been saved up in the joint account, it is likely that the vacation property, or at least part thereof, would be included in the matrimonial pool. While we hope that the various examples above have helped you to better understand whether your asset would go into the matrimonial pool, these examples are but for illustration purposes only and are not meant to be legal advice.
In determining what asset would fall within the matrimonial pool and available for division would depend on how the parties acquired the asset, and how they lived and spent during their marriage. How the parties have enjoyed or used their assets will be specific to individual facts and circumstances and may lead to different outcomes depending on the facts.
Ultimately, the outcome weighs heavily on the specific facts of each case, which differ greatly from person to person. Being aware of whether your asset goes into the matrimonial pool allows you to make better decisions and take the necessary precautions to ensure that certain assets which you wish to safeguard will not be ordered to be split with your spouse in the event of a divorce.
At Jacque Law LLC, we have many years of experience handling a wide range of matrimonial matters (including contested and uncontested divorces). If you would like to discuss any of the above further, please do get in touch with us.
1 Singapore Court of Appeal decision of USB v USA and another appeal [2020] SGCA 57