SINGAPORE – A 53-year-old self-employed man managed to save over $1.2 million in his CPF accounts, and this huge sum helped to boost his share of the matrimonial assets during his divorce.
Such an amount is uncommon for Central Provident Fund members in their early 50s unless they have been diligent in making annual contributions over the past two to three decades and have also refunded portions of their funds that had previously been withdrawn for home loans.
Of course, those who use only cash to service their home loans or have never bought any properties will typically have higher CPF savings, as interest earned annually will be compounded to increase their overall balances.
This case should provide a compelling lesson for those who are self-employed because making voluntary CPF contributions can help them accumulate decent savings for retirement as well as reduce their annual tax bill.
The man, who is a co-owner of two companies, draws a monthly salary of about $9,000, but likely ensured that his companies made the maximum annual contribution of $37,740 to his CPF accounts.
He is very conservative with his finances because, apart from his CPF, he had more than $1.5 million in savings in his bank account.
He does not dabble in shares and his only investments are two insurance policies with a combined value of over $100,000.
One reason he is cash-rich is that he probably focused most of his attention on his business, which was his most valuable investment. His 45 per cent stakes in the two companies were valued at more than $4 million.
He has an unusual arrangement with his business partner – they jointly bought a bungalow, which had a value of more than $14 million.
The property was registered in the names of both their wives, but only the man and his then wife lived in the house.
The two men also set up a company for their wives, who jointly owned it.
In this case, the man’s former wife drew a monthly salary of $6,000 even though she did not need to perform any work at the company.
At the time of their divorce, she had only about $200,000 in her CPF accounts, because over $300,000 had been withdrawn from her Ordinary Account to pay for the home loan.
Her personal assets and savings were not known because she chose not to take part in the divorce proceedings.
But the value of the known assets listed in her name was substantial. These included her half-share of the house, which was valued at $7 million, and her half-share of the company, which was estimated to be worth $500,000.
This unusual case provides four interesting insights for couples on how they can better manage their finances.
Apart from his investment in the half-share of the house, the husband’s most valuable asset was his $4 million stake in his two companies.
He noted that one of his companies was started eight years before he got married, while he used funds from his parents to set up the other during the marriage.
The man argued that since his companies were not set up with income he had earned while married, they should be classified as non-matrimonial assets.
The High Court found that since his wife had not done anything to enhance the value of the companies, they would be deemed non-marital assets and would not be considered in the split.
It does not pay to be a stingy spouse in a marriage because when it comes to asset division for couples, the one who pays the most will usually get the bigger share of the matrimonial assets.
It does not really matter whose name is on the asset because the law will give credit to the person who paid for it.
Although the half-share of the $14 million house was in the wife’s name, the court found that the bulk of the purchase cost came from the husband. She had contributed only $300,000 from her CPF savings to pay the mortgage.
Similarly, she did not pay anything for the half-share of her company, which was worth $500,000.
As she did not take part in the hearing, the court found that her only known asset was the $200,000 in her CPF accounts, compared with the husband’s cash, CPF and insurance policies, which amounted to about $2.8 million in total.
So, after considering the couple’s assets and outlays, the court found that the husband’s financial contribution to the household was 95.5 per cent, while the wife was credited with only 4.5 per cent.
Mothers usually score very high when it comes to indirect contributions for being the primary caregiver of the children in the family.
In this case, the couple are childless, but they had adopted five children aged seven to 12.
In this aspect of the marriage, the court noted that the evidence was “very much against the wife”, because instead of caring for the children, she neglected and abused them, while constantly insisting that they should return to their biological parents.
There were also allegations that she caused “pain and suffering” to four of the children, as she had liked and cared for only one of them.
As a result, the husband became the primary caregiver and took care of them with his domestic helpers.
Indeed, it was the wife’s behaviour that prompted the husband to file for protection orders and eventually divorce.
As the wife hardly made any indirect contributions to the family, the husband was given an exceptionally high score of 92.5 per cent, as opposed to her 7.5 per cent.
So when considering both contributions, the court ruled that the husband was entitled to about 95 per cent of the total assets of $10.8 million, while the wife was entitled to only 5 per cent, or $540,000.
As part of the split, the court ordered the wife to transfer her share of the house and her company to the husband. In return, he had to refund the $300,000 that had been withdrawn from her CPF savings for the house plus the accrued interest of $60,000.
Normally, the courts are not inclined to award spousal maintenance when both parties get a decent share of the matrimonial assets or when they are earning sufficient incomes for themselves.
In this case, the court noted that as long as the wife was earning $6,000 per month, she would be able to take care of herself. But if she had to give up her company, she would cease to earn such an income.
So the court ruled that upon cessation of her monthly salary, the husband would need to pay her monthly maintenance of $6,000, as she had become accustomed to this income during the marriage.
The main lesson from this case is simply this: It pays to be diligent in saving and managing your funds, because even if things do not go well in your relationship, you will still get to retain most of your assets.
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