Divorce is difficult. Even in a country like USA divorce is difficult. In a country like India there is social stigma, and that makes divorce even more difficult and of course it is painful too.
The worst thing you can do is to make it more painful by bringing in complicated financial transactions. Lets see what hits you real bad:
- Division of personal assets: When you have been married for say 17 years invariably all the assets in the house have been acquired with a lot of money, love and effort. Dividing the assets is difficult emotionally of course, but the bigger assets – house(s), car, maybe even more difficult. If you have been lucky enough to have 2 houses, maybe it is easier, if not, one of you have to give up the house in favor of the other.
- Division of business assets: When the 2 people divorcing belong to the same profession – dentists, opthamologists, etc. there is this additional pressure to distribute the business assets too. The financial mess that we had created in the past visit us now with a vengeance. The assets acquired by the husband and the EMI paid by the wife, the guarantees given by the girl’s father or by the boy’s father – bring in emotions too. Well, one needs to handle these with more sense and less emotions. The more you complicate, the greater the pain and greater the fees for the lawyer and the accountant.
- Children’s future expenses: Children get used to turning to one parent for permissions and one parent for money. So when the 12 year old sees the split invariably they are devastated. The parents have to sit together and work with a financial planner. The parents have to do some SIP to meet the kid’s higher education and wedding plans. Some parents completely abdicate their part of the duty – so the single parent accepting the responsibility of the kid has to be ready for irresponsible behavior of their ex-partner.
- Division of Debt: Just as the assets are divided among the splitting couple, the debt also has to be divided. So the home loan, car loan, credit card debt have to be sorted out. So the best thing to do is to clean up the debt and cut up the card, however it may not be so simple. So sit with a financial planner, or accountant and work out a plan. The good news is that any debt that is only in one name will generally be the responsibility of that person; it’s very unlikely you’ll get stuck paying off your spouse’s credit cards. But the house mortgage? The new car payment? Joint credit cards? Those you may wind up having to pay off, depending on what the court decides. Even in an acrimonious proceeding, this is in the best interest of both parties.
- Tax troubles: you may have been paying some home EMI together – luckily in India you can still claim the individual deductions and you will go from being a spouse to being just a joint owner. Now one of you cannot prepay a bigger portion..etc. So sort out the loan repayment, ppf account, Lic policies – remember there is no incentive to keep your OWN policies live with your ex spouse as a nominee. So you may need to sort out some of these things too.
- Retirement plans: If you have opted for family pension – you may want to reconsider shifting to a single life – you may pay lesser contributions. You will have to change the nomination, make your children the beneficiary, and take all administrative steps with other assets like PPF, etc. too.
- Sheer dishonesty: what if you have co-signed a student loan for his brother’s higher education? what if the house is mortgaged for his sister’s education and you cannot now sell it? what about assets and liabilities that he has hidden from you?
Well divorce is not easy emotionally….but do not complicate it and further mess it up with the finances. Work with a lawyer, CA, and a personal financial planner…
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