When couples split, what is left of their home is a set of walls and roofs - a house, which may in all likelihood be mortgaged. When you split from your spouse, how do you take care of what is most often the family's biggest investment?
Assets are one of the main reasons for dispute when a couple separates. The country's lawmakers are considering granting women the right to their husbands' residential property if they part ways, irrespective of whether it was acquired before or after marriage. In the current draft of the proposed amendment, the wife's share will be decided by the court.
However, under the current laws, a woman seeking divorce is not entitled to any share in the husband's property. The ownership rests with the person who is holding the title. "If the property is bought by the husband while the two were together and he holds the title, the wife can make a claim if she can prove her equity in the property," says Kaviraj Singh, managing partner, Trustman, a New Delhi-based law firm.
A lot of people buy property with own money but register it in the name of their wives to benefit from the lower property registration fee for women. In such a case, the wife can continue to retain ownership.
"In case a property is purchased and paid for by one person and the title is held by the other, the person in whose name the property is will be considered its legal owner," says Singh.
However, if the other person can prove in the court that he/she funded the purchase, even though the title is held by the spouse, he/she can claim the property.
An inherited property remains with the person to whom it has been transferred.
The ownership of properties comes into the picture only when there is no agreement between the husband and the wife on who will get what. Nowadays, both husbands and wives contribute to the family's investment kitty. In a smooth divorce, they can divide the property based on ownership, individual contribution and mutual understanding.Joint Properties
If the property has been bought from contributions made by both you and your spouse, it's best to share it on the basis of individual equity. Revisit bank accounts and determine individual contributions towards down-payment and monthly instalments to arrive at the share of each spouse. You can then get the value of the property assessed to arrive at the individual stakes.
"If the property in held jointly, you need to do the paperwork to transfer it to one person. Here, one needs to factor in stamp duty and registration costs as well. Alternatively, if both have contributed, you can consider selling it and dividing the proceeds," says Sumit Vaid, founder and chief executive, FFreedom Financial Planners.
Profit from a house sold after being held for three years attracts long-term capital gains tax
, while any gain from an early sale is included in the taxable income. If you sell a property within five years of purchase, you will have to factor in the reversal of tax deductions that you might have claimed.Sell and move out:
Sell the property and share the proceeds based on individual equity. If you have an outstanding loan on the property, that will have to be first paid off or deducted from the proceeds.House retained by one spouse:
If one of you is going to retain the property, the person who retains it can buy out the other person's share on the basis of its market value.House remains a joint property:
Deferring sale/transfer of property held jointly makes financial sense if you want to minimise the tax implications and benefit from any appreciation. Do have the liabilities and claims properly drafted in your separation agreement.