SINGAPORE – Just like cash in bank accounts, funds in CPF accounts are often sought after by combative spouses when it comes to the division of matrimonial assets during divorce.
Those with large amounts of savings in their CPF accounts often go to great lengths to try to keep their estranged spouses from having a share of the money.
This option, however, is usually open only to those who marry late, as CPF balances accumulated before marriage can be viewed as premarital funds and excluded from the matrimonial pool.
This was what happened to a man who had $624,000 in his CPF accounts during his divorce.
He said his former wife was not entitled to share $253,000 of the savings because this amount was contributed to his CPF about 12 years before the marriage.
The High Court agreed with him and included only $371,000 of his CPF in the matrimonial pool because this sum was contributed to his account during the marriage.
Here are three important rules relating to the CPF that couples should know.
If a couple used their CPF savings to purchase their matrimonial home, they will need to make a refund to their CPF accounts if the property is sold.
This usually happens after they pay off any outstanding loan with the sales proceeds.
When it comes to refunding CPF accounts, the courts can order this to take place before dividing the net sale proceeds, or after dividing them, so that payments are made from each party’s share of the proceeds.
Once the money is returned to your Ordinary Account (OA), you can immediately use it again to buy a home.
The good news is that the refund amount from the sale proceeds should be more than the total amount that you previously withdrew to buy the matrimonial property, because it would include the “accrued interest” on the original.
Such interest is your money because the refund process helps you to recover the interest revenue – pegged at the current OA rate of 2.5 per cent – that you “missed out” on when you used the funds for your property.
Having more money in your CPF account is especially critical for divorcees who stay single, as they need more savings to plan for their retirement.
A couple’s CPF money accumulated during marriage will be put into the matrimonial pool for sharing if they split up, just like other assets acquired during the marriage.
In a case involving a couple whose union lasted from 1994 to 2017, the husband wanted the court to disregard his CPF contributions prior to his marriage.
But the husband could not provide any documents to show how much he had contributed before 1994. As a result, his total CPF balance of about $400,000 at the time of the hearing in 2018 was put in the matrimonial pool.
The court did not exclude the CPF contributions before 1994 because the amount was likely to be low since he had worked only a couple of years before his marriage.
If you have nominated your spouse as the beneficiary of your CPF money, you should make a fresh nomination if the marriage ends in divorce.
Otherwise, the funds will still go to your former spouse upon your death. This is because, unlike a marriage, which will revoke your past nomination and leave you without a named beneficiary, a divorce does not make such changes to your CPF nomination.
Even if you remarry, which activates the reset button, you should remember to put in a fresh nomination so that your CPF money will go to your chosen beneficiaries.
As you cannot distribute your CPF money through your will, it is wise to get the CPF nomination done. Details on how to do this online or in person can be found on the CPF portal.
You should not wait for a personal crisis, such as a divorce, before you learn how important schemes like CPF savings can benefit you. Since many marital fights erupt over money woes, knowing how to keep your finances in order will go a long way towards keeping peace and harmony in the family.
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Source : https://www.straitstimes.com/business/invest/when-cpf-savings-spark-disputes-in-divorces
