Divorce Financial Planning

Financial Planning During Divorce

Divorce is not just an emotional challenge but also a significant financial transition. Proper financial planning before, during, and after divorce is crucial to protect your financial well-being and secure your future. This comprehensive guide will help you navigate the complex financial aspects of divorce in Singapore.

Pre-Divorce Financial Preparation

Financial Documentation

Gather comprehensive financial records, including:

• Bank statements (past 3-5 years)
• Investment account statements
• CPF statements
• Property deeds and mortgage documents
• Insurance policies
• Tax returns (past 3-5 years)
• Employment contracts and pay slips
• Business financial records
• Loan agreements and credit card statements
• Retirement account statements

Asset Inventory

Create a detailed inventory of all assets:

• Real Estate: Primary residence, investment properties
• Financial Assets: Bank accounts, investments, bonds, stocks
• Personal Property: Vehicles, jewelry, art, collectibles
• Business Interests: Ownership stakes, professional practices
• Retirement Accounts: CPF, pensions, retirement plans
• Insurance: Life, health, property policies with cash value

Debt Assessment

Identify all liabilities:

• Mortgage loans
• Car loans
• Personal loans
• Credit card debt
• Business loans
• Tax liabilities
• Joint guarantees

Financial Independence Preparation

• Open individual bank accounts
• Establish personal credit
• Update beneficiary designations
• Secure copies of important documents
• Build an emergency fund
• Review and adjust insurance coverage

Budgeting During Divorce

Expense Analysis

Create a detailed budget of current and anticipated expenses:

Income Assessment

• Salary and employment income
• Business or self-employment income
• Investment returns
• Rental income
• Potential spousal or child support
• Other income sources

Temporary Budget Adjustments

• Prioritize essential expenses
• Reduce discretionary spending
• Avoid major financial decisions
• Build emergency savings
• Monitor cash flow carefully

Asset Division Considerations

Valuation Strategies

• Real Estate: Professional appraisals, comparative market analysis
• Business Interests: Business valuation experts, income approach
• Retirement Accounts: Present value calculations, tax implications
• Personal Property: Professional appraisals for valuable items

Tax Implications

• Property Transfer: Stamp duty considerations
• Investment Assets: Capital gains tax potential
• Retirement Accounts: Tax treatment of CPF divisions
• Business Transfers: GST and income tax implications

Long-term Value Analysis

Consider the true long-term value of assets, not just current value:

• Growth potential of different assets
• Liquidity and accessibility
• Maintenance costs and ongoing expenses
• Tax consequences upon eventual sale
• Risk profile and volatility

Housing Decisions

Keeping the Family Home

Factors to consider:

• Affordability of mortgage and maintenance
• Emotional attachment vs. financial practicality
• Children's stability and schooling
• Potential for refinancing
• Future value and market conditions

Selling and Moving

• Market timing and sale price expectations
• Transaction costs (agent fees, legal fees)
• Tax implications
• Relocation expenses
• New housing affordability

HDB Considerations

• Eligibility to retain HDB flat
• Minimum Occupation Period (MOP) restrictions
• CPF refund requirements
• Ethnic Integration Policy implications
• HDB loan eligibility for new purchases

Retirement Planning

CPF Considerations

• Division of CPF balances
• Impact on retirement adequacy
• CPF Life and retirement income
• Housing withdrawal limits
• Rebuilding retirement savings

Retirement Recalculation

• Reassess retirement timeline
• Adjust retirement income goals
• Increase savings rate if necessary
• Review investment strategy
• Consider working longer if needed

Insurance Planning

Health Insurance

• Secure individual health coverage
• Review MediShield Life and Integrated Shield plans
• Consider supplementary coverage
• Evaluate children's health insurance needs

Life Insurance

• Update beneficiary designations
• Reassess coverage needs
• Consider term vs. whole life policies
• Insurance as part of maintenance obligations

Other Insurance

• Disability income insurance
• Critical illness coverage
• Long-term care insurance
• Property and casualty insurance

Tax Planning

Filing Status Changes

• Timing of divorce and tax year implications
• Individual vs. joint assessment considerations
• Tax reliefs and rebates eligibility

Tax Deductions and Reliefs

• Qualifying Child Relief
• Working Mother's Child Relief
• Parenthood Tax Rebate
• Foreign Maid Levy Relief
• Course Fees Relief for retraining

Post-Divorce Financial Rebuilding

Financial Goal Reset

• Establish new short, medium, and long-term goals
• Create realistic timelines
• Prioritize financial security
• Develop action plans for each goal

Credit Rebuilding

• Check credit reports for accuracy
• Establish individual credit history
• Manage debt responsibly
• Build positive payment history

Investment Strategy Adjustment

• Reassess risk tolerance
• Rebalance portfolio for new circumstances
• Consider time horizon changes
• Review investment goals

Estate Planning Updates

Essential Updates

• Revise will and testament
• Update CPF nominations
• Review insurance beneficiaries
• Update Lasting Power of Attorney
• Revise Advance Medical Directive

Trust Considerations

• Establish trusts for children if appropriate
• Review existing trust arrangements
• Consider special needs trusts if applicable
• Update trustee designations

Professional Support

Financial Advisors

• Divorce financial analysts
• Certified financial planners
• Wealth managers
• Insurance specialists

Legal Professionals

• Family law attorneys
• Estate planning lawyers
• Tax advisors
• Mediators