In the earlier series on financial planning for women I addressed the four primary risks faced by women. These were financial independence, lower share of assets, failure of marriage, unequal division of inheritance. I also narrowed down on the strategies to be adopted for financial dependence and lower share of assets. In this part four of the series on financial planning for women I would be addressing the risk of failure of marriage.

Failure of Marriage
Failure of marriage is so much a part of our society today. Such situations were not totally absent a decade ago but were under wraps due to the social structure and general dependency on the male bread earner of the family. You may be already aware of the several reasons for failure of marriage. Hence we are going to focus on a moot question “What-if” i.e. ‘What if this happened to you?’ How prepared are you emotionally and financially? I am not painting a sorry picture, I truly believe that marriage is a beautiful institution but you must know that if you are married – failure is a possibility.

Planning to manage failure is just like the way we protect our possessions for instance a house, car to name a few by taking an insurance cover. I hope you never face the trauma and stress of divorce but “What-if….”

You need to be objective, not emotional
The most important thing in managing a failure is to be objective about the way you plan to move ahead. But you must do this only when you are emotionally stable. If you are not emotionally stable you will not be able to be objective and that could prove to be disastrous. Women generally are more emotional then men and tend to get easily swayed at such times. Do whatever it takes – choose carefully amongst the well wishers you want to talk to (very important), go shopping, take a break, you must cool down first before you take any decision, sign any paper or give any commitment. Then start thinking about your assets. The critical part here is valuation and distribution of assets and we are assuming that things would be amicably resolved practically out of court.

Distribution of assets should follow the rule of division based on future values
As a first step, place a value to everything you have (property, shares, jewellery etc) so that you arrive at the total net worth. This is the easy part. How do you distribute? Let us assume you want to make two equal halves. So will you literally distribute 50:50 between yourself? – Wrong. You must look at the type of asset you have. Consider a time frame – say 20 years or say retirement age or whatever you like. Project the value of each asset. Take a broadly accepted growth rate for each asset and value it at your desired time frame. Do you see what I am getting at? Lets say you have equity shares of Rs 5 lakh and say gold jewellery worth Rs. 5 lakh. Now 20 years later the value of shares could be Rs 40 lakh and your jewellery may be worth Rs 15 lakh, so the one who has the jewellery is obviously the loser. Distribution of assets must follow the rule of division based on future values and not current values. In this example a more appropriate division would have been Rs 3 lakh of shares to one spouse and Rs 5 lakh of jewellery and Rs 2 lakh of shares to the other spouse. This calculation is just indicative for explanation sake only.

Realign or transfer assets preferably before divorce papers are filed There is an even bigger problem that you would need to manage. Unfortunately, the ownership of the asset  in question may not be properly distributed. For instance the house may be in the name of the husband who pays the equated monthly instalments. And perhaps the household expenses are drawn from the wife’s salary. Eventually, the husband would be the owner of the house and not the wife. Hence assets may have to be sold or transferred or realigned as the case may be depending on the assets in question.  This should ideally happen before the papers for divorce are filed in court. As settlements take place amicably outside the courtroom. Now this obviously applies if you are going through a divorce or are likely to in due course.

Let us take a more general situation where everything is fine. What would you do to manage this risk? There are two basic things to be done viz., Estate planning and drafting a Will for each spouse. Thereafter simply keep updating it – every year or two years as you like.

Kartik Jhaveri, an expert at Financial Planning, is a Certified Financial Planner and a Chartered Wealth Manager. He may be reached at kartik@transcend-india.com.

More from the same author on Women and Money:
Women and Money Part I: Planning is a must  
Money risks women face and how to mitigate them  
Family and finance: Woman, demand or be denied  

Disclaimer:
The contents of the above articles are the intellectual property and copyright of the author, Kartik Jhaveri. No part may be used or reproduced in any form or manner. If you choose to act upon the information contained in the above article it is at your own risk. This article is purely educative and you are strongly advised to consult an expert prior to taking any significant decision.