Post-Divorce: Transfer of Properties & CPF Refunds
Divorce is a complex process that often involves more than just the dissolution of marriage. One of the critical aspects that requires careful consideration is the transfer of ownership of matrimonial assets, particularly property, and the issue of CPF (Central Provident Fund) refunds. In Singapore, the division of matrimonial assets, including real estate, is governed by the Women’s Charter 1961. CPF refunds add another layer of complexity to the transfer of ownership following a divorce.
This blog post will explore how property is handled in a divorce, the law on CPF refunds, and what individuals should consider during this process.
Division of Matrimonial Assets in Singapore
Under Singapore law, matrimonial assets include all property acquired during the marriage, such as the matrimonial home, investments, savings, and CPF balances. When a divorce occurs, these assets are typically divided between the parties in a manner that is “just and equitable” as per Section 112 of the Women’s Charter. Courts take into account various factors, including:
The contributions of each party (both financial and non-financial) towards the acquisition of the assets,
The welfare of any children of the marriage, and
The length of the marriage.
Transfer of Property Ownership
One of the most common matrimonial assets is the family home. When deciding what to do with the property after a divorce, there are typically three main options:
Sell the Property: The property may be sold, and the proceeds divided between the parties according to a court order or a mutual agreement.
Transfer Ownership to One Party: If one party wishes to retain ownership of the property, they may buy out the other party’s share. This often happens when one party continues living in the property, especially if there are children involved.
Joint Ownership: In some cases, the couple may continue to own the property jointly, though this is rare and usually done to defer sale until a future date, such as when children reach a certain age.
Regardless of the method chosen, if CPF funds were used to finance the property, the issue of CPF refunds must be addressed.
CPF Refunds in a Divorce
The CPF is Singapore’s compulsory savings scheme for retirement, housing, and healthcare. If CPF funds were used to purchase a property, there are three (3) refund options when it comes to the outgoing owner’s CPF account when the property is transferred to the remaining owner:
no refund to the outgoing owner’s CPF account;
partial refund to the outgoing owner’s CPF account; and
full refund to the outgoing owner’s CPF account.
Parties must state clearly in the Interim Judgment or divorce Order of Court the type of CPF refund to the outgoing owner’s CPF account when the property is transferred.
For options 2 and 3, the refund to the outgoing owner’s CPF account at the date of completion of the transfer or the transfer cannot be completed.
The Law on CPF Refunds
No Refund
If there is no refund to the outgoing owner’s CPF account when the property is transferred, then the CPF funds used by the outgoing owner to finance the property will belong solely to the remaining owner after the transfer. After the transfer, when the remaining owner sells the flat, the remaining owner refunds to his/her own CPF account both the CPF funds used by the remaining AND outgoing owner.
For example: if the outgoing owner had used $100,000.00 from his/her CPF account to finance the property, upon the transfer, the $100,000.00 belongs solely to the remaining owner. If the remaining owner had used $50,000.00 from his/her CPF account to finance the property, after the transfer, when the property is sold, the remaining owner (who has become the sole owner of the property) will need to refund a total amount of $150,000.00 to the remaining owner’s CPF account upon the sale i.e. both the remaining and outgoing owners’ CPF funds used to finance the property. The amount to be refunded includes:
the principal amount withdrawn from the CPF account for the property purchase; and
accrued interest, which is the interest that would have been earned if the money had remained in the CPF account.
Partial Refund
If there is partial refund to the outgoing owner’s CPF account when the property is transferred, then the remaining owner shall make the partial refund to the outgoing owner’s CPF account but the balance CPF funds used by the outgoing owner to finance the property will belong solely to the remaining owner after the transfer.
For example: if there is a partial refund of $50,000.00 to the outgoing owner’s CPF account and the outgoing owner had used $70,000.00 from his/her CPF account to finance the property, upon the transfer, the remaining owner shall pay $50,000.00 to the outgoing owner’s CPF account. The remaining owner can use either cash and/or CPF Ordinary Account balance funds to repay the $50,000.00 to the outgoing owner’s CPF account. The balance $20,000.00 that the outgoing owner had used to finance the property belongs solely to the remaining owner. If the remaining owner had used $100,000.00 from his/her CPF account to finance the property, after the transfer, when the property is sold, the remaining owner (who has become the sole owner of the property) will need to refund a total amount of $120,000.00 ($100,000.00 + $20,0000.00) to his/her CPF account upon the sale.
It is important to note that this refund is made to the CPF accounts, not in cash to the party concerned.
Full Refund
If there is a full refund to the outgoing owner’s CPF account when the property is transferred, the CPF Board requires that all principal and accrued interest CPF funds used by the outgoing owner to finance the property shall be refunded to that spouse’s CPF account.
It is important to note that this refund is made to the CPF accounts, not in cash to the party concerned.
CPF Refunds When Retaining the Property
If one party decides to keep the property post-divorce and buys out the other spouse’s share, they must ensure that the CPF refunds are settled. The buying party may need to take out additional loans or liquidate other assets to facilitate this.
Considerations When Handling Property and CPF Refunds During a Divorce
The transfer of property and CPF refunds can be a significant financial undertaking during a divorce. Some of the considerations include:
Valuation of the Property: Before agreeing to transfer or sell the property, it’s crucial to obtain an accurate valuation of the property to ensure a fair settlement.
Outstanding Mortgages: If there is still a mortgage on the property, the parties must consider how this will be handled. Typically, the party who keeps the property will need to take over the mortgage payments or refinance the loan.
CPF Refunds and Accrued Interest: The CPF refund requirement can add significant costs to the transfer of property. Both parties should be aware of their respective obligations and factor this into their financial planning.
Legal Costs: Transferring property ownership will involve legal fees, which can further complicate the financial aspects of the divorce.
Conclusion
Divorce can be emotionally and financially draining, particularly when it comes to the division of assets like property. In Singapore, the transfer of ownership of matrimonial property and the issue of CPF refunds are critical elements of the divorce process. It is essential for divorcing couples to be aware of their legal obligations regarding CPF refunds and to plan accordingly, especially when deciding who will retain the family home.
Legal advice is crucial to navigate this process effectively, ensuring that the division of assets is fair and that all CPF obligations are met. Proper planning and understanding of the law will help minimize financial strain and allow both parties to move forward with clarity.
If you’re going through a divorce and need guidance on transferring ownership of property or handling CPF refunds, consider consulting a family law expert to ensure your rights and obligations are protected. Our lawyers are both experts in divorce and conveyancing laws. Contact our lawyers at +65-8780-2499 for more information.
