Addressing concerns over asset distribution in the event of a divorce, after decoupling
Having been in numerous engagement consulting clients in decoupling property, a common concern that often arises or looms around in our clients mind, is the issue of asset distribution in the event of an unfortunate divorce.
Context – Asset ownership after decoupling
To ensure everyone is on the same page, let’s take a detour to build some context.
Here’s the setup. Today you and your spouse jointly owned a property valued at $2.0 million. Both of you then decide to decouple your names in the property, with you buying over your wife’s share in the property. And your wife will now purchase a smaller property with only $1.0 million, solely under her name.
Property ownership at a glance
- Under your name – $2.0 million property
- Under your wife name – $1.0 million property
Assuming both of you contributed equally to both properties. Your wife would be concerned that in the event of a divorce, she will only be entitled to only lay claim on that $1.0 mil property and not part of the $2.0 mil property, even though she contributed financially to it.
Another scenario – 99-1 tenancy in common
Another scenario that will raise similar concerns.
As an interim step, many couples like to adopt a 99-1 tenancy in common share structure to prepare for future plans of decoupling.
In this scenario the percentage share allocation would be the following
- 99% share under your name
- 1% share under your wife name
- Or vice versa
Again assuming both of you contributed equally in terms of financing the property, the minority 1% shareholder would be concerned if he or she will only be allocated 1% share of the property in the event of a divorce.
First, a quick primer on who we are
We respect the fact that you will be committing the next 5 mins of your time to read this article. Thought it would be helpful to introduce the people behind the keyboard.
We are a team of specialist realtors, specialising in decoupling property. Our goal is to remove the complexity and hassle of decoupling from property owners and make purchasing your second property a fuzz free experience.
Our suite of solutions includes
- Decoupling lawyer recommendation
- Decoupling timeline advice and management
- Decoupling cost and budget calculation
- 2nd Property research and selection
- 2nd Property price negotiation and purchase
This article was crafted with insights from decoupling lawyers and our personal experience consulting client. As a disclaimer, please do not take this as legal advice. For legal advice drop us a text for a reliable decoupling lawyer.
Title of ownership and structure of holding does not affect distribution of assets in the event of a divorce.
Addressing the elephant in the room, the concern over divorce asset distribution and decoupling property is not really a cause for concern.
In short, whether a property is held solely under your spouse name does not exclude you from being entitled to a distribution of its value, in the event of a divorce.
The family courts will have the power to order the division of the asset as long as they considers it a “matrimonial asset”
Matrimonial asset as the first defining criteria to qualify an asset for distribution during divorce
In the earlier section, we established that the court does not solely look at title ownership as the main factor for asset distribution. In fact, whichever asset that fits the definition of a matrimonial property will be considered for distribution irregardless of whether your name is on the title deed or if you are a minority 1% shareholder.
Let’s explore the definition of matrimonial property.
Extracting an excerpt from PKWA Law’s article. The definition of matrimonial property is as follows.
- Any asset acquired before the marriage by “one party” or “both parties” during Marriage
- Or any asset enjoyed or used by both parties or one or more of their children while residing together in the property for shelter, education, transportation, recreation, household or social purposes
- Any assets that have been substantially improved in the course of marriage by both parties
- Any other assets of any nature acquired during the marriage by one party or both parties to the marriage
- Does not include any asset that one party acquired at any time by way of gift or inheritance that had not been substantially improved through the marriage by the other or both parties
So applying this back to our case of decoupling property and owning 2 properties under separate names.
As long as the property was acquired during the course of marriage, it becomes deemed as an matrimonial asset irregardless of whether your name is on the title deed or not.
What about the apportioning of value during the asset distribution process ?
Does owning 1% share under tenancy in common structure, meant that you will only receive 1% split in value ?
The court does not reference the manner of holding or share allocation but by the principle of what is deemed fair and equitable.
Some of the factors that the court may consider include the following
- Direct contributions (i.e. monetary contribution to financing of properties)
- Indirect contributions (i.e. homemaking, other intangible efforts towards the marriage/family)
Refer to the Womens charter for further detail on asset distribution in the event of divorce
The Court also has power to order division of assets irregardless of the manner of holding.
So even if you own a property in a 50-50 joint tenancy, the court does not necessarily need to order an equal share split during divorce.
Conclusions
Ending off on a brighter note, decoupling property to purchase a second property is supposed to be both a lifestyle and financially enriching initiatives.
Our goal of creating this article is to ease the concern that many property owners have over this issue, which has caused them to sit on the sideline.
This article was crafted with insights from Advent Law, but written in our own understanding and intepretation. As always do not take this as legal advice, refer to a experienced decoupling lawyer for assessment of your individual circumstances.
