Why losses and windfalls must be shared in a divorce

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SINGAPORE – The phrase “for better or for worse” in marriage vows does have a practical meaning even when couples break up because the law often holds them liable to share fortunes and misfortunes that come their way.

For instance, insurance payouts can be shared in a divorce if the policies are taken out to benefit the family, and not a particular spouse.

In 2012, the Court of Appeal made a landmark ruling involving the payout of the home protection insurance scheme that most HDB flat owners would have because such policies would pay up their outstanding loans should they die or suffer disability.

In that case, the husband became blind and the insurance scheme paid over $170,000 to fully discharge the outstanding mortgage loan of the matrimonial home.

When the couple split later, the court had to decide whether the scheme’s payout was solely for the benefit of the husband. If so, he would be entitled to deduct $170,000 from the sales proceeds of the flat first before the balance could be shared.

But the court ruled that he was not solely entitled to the payout because the policy was specifically targeted at protecting the family home, and not him.

The court then found that the purpose of the policy was not aimed at addressing the husband’s general financial concerns due to his disability, but the prospect of him and his dependants losing their home should the family have problems paying the mortgage.

So the whole fully paid-up flat would be deemed as a matrimonial asset and the husband did not get to carve out his share first from the insurance payout.

The situation would be different for medical insurance policies, as such payouts are meant to provide financial assistance to the insured, who may need long-term care.

The High Court dealt with at least two such cases recently, involving two women who had critical illness policies.

One of them received a payout of over $435,000 when she was diagnosed with breast cancer, while the other received more than $450,000 plus a monthly payment of $1,200 for life after she was hit by two rounds of strokes.

The husbands in the two cases could not share these payouts because the payments were not assets acquired as a result of the efforts of the parties, but were meant to cover the wives’ specific medical needs.

Here are two other examples of how the courts have handled cases involving windfalls and misfortunes.

Lottery winnings

In one case, the wife won a sports car in a lucky draw, which she sold for $83,000, as it did not come with a certificate of entitlement. When her marriage hit the rocks later, she argued that the lucky draw win was hers alone because she was the lucky one who won the prize without any help from her husband.

But her luck ran out in the High Court, which ruled that windfalls that occur during a marriage – be it a lottery win or an extra large bonus payment to a spouse – would be considered as joint income to be shared. Since the car was sold for about $83,000, the spouses would be entitled to about $41,500 each.

Loss due to scam

Before his marriage broke up, a man placed about $34,000 in an online get-rich-quick investment, hoping he would have better luck with money than with love. But the scheme was a scam and he lost the whole sum. The wife was so furious she wanted him to repay that sum during their divorce.

Normally, spouses who deliberately spend large sums of money to spite their estranged partners must return the funds if these came from the family pool and were used without the other spouse’s permission.

But there was no evidence that the husband had made the investment to deprive the wife of a bigger share of their assets. As he was a genuine victim of a scam, the loss meant the couple had $34,000 less to share.

Frankly, it is often better for estranged couples to part amicably because things can only become worse if they choose to fight.