Legal Agreements

How to Navigate Property Division in a Divorce Settlement Agreement

calendar20 May, 2023
timeReading Time: 4 Minutes
How to Navigate Property Division in a Divorce Settlement Agreement

The issue that remains in question during divorce proceedings includes the division of assets and liabilities for property division in a divorce settlement agreement. The assets include the marital property, which the couple acquired before and after the marriage. However, the question arises of whether the couple is open to negotiating and agreeing on their own on how they will be dividing the assets and liabilities, or whether, in the case of disagreements, they want the court to decide for them.

The ownership of matrimonial property could be determined by the model on which it is based. Widely, there are two models of ownership, which are:

Models of Ownership

Separate Ownership Model

This model is based upon the concept of individualism. Under this model, if property has been acquired or bought by an individual before the marriage or even after the marriage, it will continue to be retained by that spouse only. The other spouse has no right to claim ownership of the property. This particular model is mostly practised in those countries where the couple, collectively as well as individually, holds financial independence and has a stable economic background. Due to this, there is no scope for tension between the spouses regarding the ownership of the property after the dissolution of their marriage. Thus, in countries where a separate ownership model is followed, it is easier to division of assets between the spouses on the basis of the title deeds to the property.

Community Ownership Model

This model is based on the assumption that the spouses commonly own the property, and after their divorce it has to be equally division of assets between them. The fundamental idea behind this concept is that spouses should not only contribute monetarily to purchasing the property, but also make non-financial contributions. This is to ensure that the efforts of the non-working spouse are not taken for granted and that financial security is provided.

In countries like England and India, the separate ownership model for the distribution of marital property is followed, whereas a few countries like Sweden and France follow the community ownership model.

Benami Transactions

The Prohibition of Benami Transaction Act, 1988[1], also known as “the Act,” governs Benami transactions, which are when a person purchases property in the name of their spouse. Section 4 of this Act explicitly prohibits the right to recover property held by Benami. For example, if a husband purchases a property in the name of his wife, he will not be allowed to have title to that property unless the husband proves that he was the one who paid the consideration for purchasing the property in the name of his wife from his known sources. If he is able to prove that, then Section 4 of the said Act will not be applicable. Sec. 2 (9) A(iii) of the said Act states that “any person being an individual in the name of his spouse or in the name of any child of such an individual and the consideration for such property has been provided or paid out of the known sources of the individual;” hence, the husband will be able to claim title over the property even if the property was purchased in the name of his wife.

When The Agreement To Division Of Assets And Debt Is Absent?

In the case where the agreement of division of assets and debts between the spouses does not exist and the couple fails to divide their marital property, the court, as per Section 27 of the Hindu Marriage Act 1955, will divide the marital property in a fair manner. Furthermore, the marital property also includes the property that was gifted or presented to any of the spouses during their marriage ceremonies as well as before and after the marriage.

Procedure of Court Dividing the Marital Property

The courts, when dividing marital property, follow a common practise based upon individual contribution and ownership. Ownership of the property is an essential question that is asked by the court at the beginning of the division of assets proceedings.

Procedure of Court Dividing the Marital Property

Joint Ownership- Both Contributed

If the couple holds joint property that was purchased with the contributions of both spouses, then it will be divided proportionally based on the ratio of their contributions. The individual’s equity will be considered by the court during the division of assets of marital property. For example, if the husband had paid 70% of the total expenses incurred during the purchase of the property, he would be entitled to 70% of the current value of the property, which would be determined by the court.

Joint Ownership – Only One Contributed

In cases where marital property is owned by both spouses but only one of them contributed to purchasing it, if the spouse is able to prove he or she paid the amount through his or her known sources, he or she may acquire the full property, irrespective of the fact that the property was owned jointly. But if the spouse is not able to prove the same, then the division of assets in equal shares between the spouses.

One Has Contributed Other Has Title

In these cases, the first and foremost duty of the court is to determine the nature of the property and whether it will fall into the category of a Benami transaction or not. If a husband purchases a property in the name of his wife, he will not be allowed to have title over that property unless the husband proves that he was the one who paid the consideration for purchasing the property in the name of his wife from his known sources. If he is able to prove that, then Section 4 of the said Act will not be applicable.

Conclusion

During the divorce of the couple, it becomes essential to division of assets between them in a just and fair manner. This can be possible if any agreement regarding the same exists prior to the divorce proceedings, or the court will have to decide. The methods through which the court will decide are mentioned in the above article.

Read Our Article: Understanding The Legal Requirements For A Divorce Settlement Agreement

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