Last week I wrote how Marriage & Divorce can impact financial circumstances. Well, yesterday was Friendship Day and now many relationships start with this relationship. A commitment comes afterward or a better way of saying will be – Now we believe in “Time-Tested Relationships”. Let’s try to go into the finance side. What is the Impact on Investments for a live-in, single parent & death of spouse?
You know Indonesia is a Muslim Country but still, 100% of marriages are Love & Arranged. This number is increasing in India too. I know many of you are smiling while reading this as this is your story too.
Societal changes have made way for new relationships and it has forced the Law & Constitution to change. The process is ongoing and hence understanding is widening.
Live-In Relationships & Investments
The Supreme Court in 2015 ruled and recognized live-in relationships and has held that if a man and woman “lived like husband and wife” for a long period and had children, then the judiciary would presume that the two were married and the woman would be eligible to inherit the property after the death of her partner.
So, if a couple has attained legal age to marry, are doing due to self-willingness & exhibits in society as a couple they are deemed to be married.
So all provisions related to a spouse will be applicable.
The apex court has clarified that the children born of parents in a live-in relationship could not be called illegitimate.
If a child is born of live-in partners, then, unlike within a marriage, the mother is the natural guardian of the child.
In a live-in relationship, first phase is the “my best” phase. When the next phase of relationship arrives that is the stage one has to plan his finance.
As rules say that the partner is spouse so he/she has to include in all the financial decisions. If both are earning, the starting point would be the wealth they brought in together when started living together.
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In the case of separation, one should be ready for maintenance conditions and child upbringing related expenses.
Points to remember:
- Both life partners, need to be transparent about their finances and discuss the same more frequently. Settle on a common long term investment philosophy, investment objectives, financial goals before you invest.
- Make a clear distinction between what is owned and owed. Avoid getting into a debt-trap. Live within means as initial years of setting a family (often alone) is costly.
- Maintain a household budget and strictly follow it. Plan to jointly manage expenses with your spouse. One has to take lead here.
- Before you think of a separation, weigh the pros and cons. Take into account legal expenses, ascertain your savings and investments, the cost of running the house alone, take a count of your debt, gather all your important documents, evaluate your financial goals and restructure your financial plan, amongst a host of other facets
- Optimal insurance coverage, for both health and life, is a must.
- Have a contingency fund in place to match about 6-12 months of regular expenses.
- Engage in retirement planning and write a ‘Will’
It is really unfortunate when due to divorce and/or demise of your life partner, you are forced to become a single parent. Sometimes you want to take this role for rest of life. Really it’s the energy of these kids that keep us running and this is how you will get your focus too. Here are some personal finance pointers:
- Make sure that you diligently create and follow a household budget. Live within your means, plus save and invest efficiently so that long-term financial goals such as children’s education, their marriage, etc. can be achieved.
- Having a positive cash flow is important as surplus amounts to investments. Think of taking up a job if you haven’t been working or being an entrepreneur with the skill set you possess. In case you’re divorced and receiving/received alimony, deploy it to productive use.
- Consider starting SIPs in mutual funds especially equity funds for long term goals. They are a good way to create wealth over the long-term and achieve financial goals. If you’re planning for your children’s future needs like education don’t forget to factor in inflation as it has the power to erode the purchasing power of money
- Insurance both for- life and health, to protect the financial interest of those dependent on you – be it children, parents and/or in-laws.
- Have a contingency fund in place – which takes care of at least 6 to 12 months of your regular expenses. This will be like an emergency fund; or savings for a rainy day.
- To pass assets to your children, don’t forget to have a proper succession plan with a ‘Will’ in place.
You two got together and planned a perfect future. But the death of one’s life partner is of course extremely heartbreaking. Indeed it is not an easy journey, but you need to be strong and in control, both emotionally and financially. Here’s what you can do take control your finances.
- It will take the time to settle. Once you’ve settled down and come to terms with the inevitable; gather all
- Reach out to your insurance company with a claim intimation and forms. The insurance proceeds can be a good source of financial security or even finance your children’s education.
- Look if your spouse has left behind a Will, ensure that it’s prudently executed. Execution will help you from legal problems.
- Make a list of you deceased spouse investments. Call the banks, provident fund office and investment companies, including mutual funds and follow the necessary formalities for effective transmission of holdings in your name.
- Money of finance may not be of interest but now you need to learn a bit for yourself and family. Take control of your finances and watch out for elements that could misguide you. Talk to a good lawyer and a professional financial advisor for assistance.
- If there is a debt in name of spouse, like assets, liabilities also arise in your name. Try to pay them off using the insurance money to avoid future EMIs.
- Take a relook at your investments for important goals and if need be, seek the services of a financial advisor for review. Continue key investments to meet your retirement needs.
What is your experience on any of this relationship status?
Share them in the comments section below. Do forward the article to family and friends.