After being in the industry for sometime and based on law of large numbers, I am starting to see some of my clients getting a divorce. So I decided to write a short article on what to do when one is getting a divorce or already divorced.
- Review one’s CPF Nomination. CPF Nomination is not revoked upon divorce. However, remarry will revoke the earlier nomination.
- For insurance nomination made under the Section 45 Co-operative Societies Act, it is time to review it as well. Divorce does not revoke this nomination.
- For insurance nomination made under the Section 49L of the Insurance Act and Section 73 of the Conveyancing and Law of Property Act, this nomination is irrevocable unless all the beneficiaries give consent. Divorce does not revoke this nomination. Remarry does not revoke the nomination. (Interestingly, death of the beneficiary does not revoke this nomination too.)
- For insurance nomination made under the Section 49M of the Insurance Act, this is a revocable nomination that can be revoked by the policyholder without the need to seek consent from the beneficiary.
- It is time to review third party insurance policies such as life policies and shield plans.
- For shield plans, CPF does not permit the usage of Medisave to pay for the shield plan of one’s ex-spouse. Therefore change of payer is required. Traditionally, payer and policyholder refer to the same individual. However, this is not necessary the case all the time as each insurer practice differs. In other words, it may not be sufficient to request to the insurer to change payer. One particular insurer has a special form to change payer and policyholder due to death and divorce. Because such request is rare, most insurance advisers do not know is existence. The form is not even available on the insurer’s intranet meant to be accessible to its insurance advisers. Only professional financial planners know of such existence.
- If one has a Will, it is time to review it. Divorce does not revoke the Will. If one does not have a Will, it is time to write one. If there are minor children born by ex-spouse, the ex-spouse is the default sole guardian if one passes away. It is possible to ‘prevent’ the ex-spouse from acting as sole guardian through one’s Will.
- It is also time to review one’s retirement plan (if there was one). Previous assumptions made by the financial planner could have significantly changed due to this divorce.
The worst thing about getting a divorce is with regard to the custody of the children. The second worst thing is how to split the matrimonial assets. BUT the worst mistake is actually to wait for these two matters to fully resolve before reviewing all the points mentioned above because based on what I had observed, resolutions with regard to the custody of children and the distribution of matrimonial assets could potentially never be resolved.
It is important to review one’s financial situation immediately when one has decided to divorce. Since such review earns the financial advisers nothing as there are no sales of products, such a financial review is only offered by fee-based professional financial planners.
When approaching a fee-based professional financial planner, it is best that the planner only represents one party. This is how I would try to do by only representing one party because there are conflicts of interest. My advice would differ depending on which party I represent although the subject matter is the same.
For instance: if a policyholder seeks my advice on what to do with insurance policies with a Section 73 nomination nominating the ex-spouse as the sole beneficiary, I would likely advice him or her to persuade the other party to give consent to revoke the nomination. On the other hand, if I am asked by the beneficiary on whether should he or she give consent to revoke the same policy, my advice would be NOT to give the consent. As it can be seen that the same subject matter results in entirely opposite advice depending on which party the financial planner is representing. That is why there is an obvious conflict of interest. When a couple is married, they sit at the same side of the fence. When they are divorce, they sit at the opposite side of the fence.
Undergoing a divorce is a painful process. Never make it worst by making the wrong financial decision. By not doing anything is effectively making a decision which by default can never be the right decision.
This article first appeared on CPF Board's IM$avvy / IMSavvy website:http://www.cpf.gov.sg/imsavvy/blog_post.asp?postid={6218323-180-2286950945}
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