Everything in My Mother’s Name”: A Flawed Strategy in Divorce Proceedings

Divorce can be a complex and emotionally charged process, often involving significant financial implications for both parties. One common strategy that some individuals consider to protect their assets during a divorce is transferring everything into their mother’s name (or another relative’s name). While this may seem like a clever way to shield assets from being divided in a divorce, it is fraught with legal risks and misconceptions.

In this blog, we will explore the legal realities of the “Everything in my mother’s name” approach, its potential consequences, and why it may not be the foolproof solution some believe it to be.

Understanding the “Everything in My Mother’s Name” Strategy

The idea behind this strategy is simple: by transferring assets, such as property, bank accounts, and investments, into the name of a mother or another trusted relative, an individual might think they can prevent their spouse from claiming a share during divorce proceedings. The belief is that if the assets are no longer in the individual’s name, they are out of reach for the spouse seeking alimony or a share of the marital assets.

The Legal Risks Involved

1. Benami Transactions: Under Indian law, particularly the Benami Transactions (Prohibition) Act, 1988, a “benami” transaction refers to any property or asset purchased in the name of another person while the actual payment is made by someone else. The law prohibits such transactions and considers them illegal, except in certain cases like those involving close relatives (e.g., spouses or children). If a court determines that assets were transferred to a mother’s name merely to evade marital property division, it could be considered a benami transaction, leading to legal consequences, including the possibility of the assets being seized by the government.
2. Fraudulent Transfers: Courts are highly vigilant about asset transfers that occur during or just before divorce proceedings. If it appears that assets were transferred to another person’s name with the intention of defrauding a spouse of their rightful share, the court may declare the transfer as fraudulent. In such cases, the court has the authority to reverse the transaction and include the transferred assets in the marital estate for division.
3. Judicial Discretion: Indian courts tend to prioritize the equitable distribution of marital assets. Judges are aware of tactics like transferring assets to a relative’s name to avoid division. During divorce proceedings, the court may order an investigation into such transfers, looking into bank records, financial statements, and property transactions. If the court finds that the transfer was done to shield assets from being fairly divided, it can order the assets to be counted as part of the marital estate.
4. Income Consideration: Even if assets are successfully transferred out of the individual’s name, the court will still consider the income and lifestyle of both parties when determining alimony and child support. If the husband, for example, continues to derive income or benefits from assets in the mother’s name, the court may still calculate support payments based on this income.

Why “Everything in My Mother’s Name” May Not Work

The fundamental flaw in this strategy lies in the misconception that simply changing the name on the title of assets will protect them from legal scrutiny. Courts look beyond the surface to understand the intent and actual control behind the assets. Here’s why this approach is likely to fail:

1. Substance Over Form: Courts focus on the substance of the ownership rather than just the form. If it is evident that the transfer of assets was done to avoid their division, the court will treat those assets as if they were still in the original owner’s name. This principle ensures that the real ownership and intent behind the transfer are not hidden by merely changing the name on the ownership documents.
2. Lack of Protection: Even if the assets are in the mother’s name, the spouse can argue that these assets were intended for the family’s benefit and should be considered in the division. The courts have wide discretion in determining what constitutes marital property and may decide that the transferred assets should be part of the settlement.
3. Impact on Alimony and Maintenance: If the husband’s income is derived from assets now in his mother’s name, the court can still factor this income into the calculation of alimony and maintenance. This means that even if the assets are not directly divided, the financial obligations could still be significant.
4. Legal Repercussions: Attempting to hide or protect assets through such transfers can backfire, leading to prolonged legal battles, additional legal costs, and potentially even criminal charges under the Benami Transactions Act.

Alternative Approaches to Protecting Assets

Instead of relying on dubious strategies like transferring assets to a relative’s name, individuals facing divorce should consider the following legitimate approaches:

1. Pre-nuptial and Post-nuptial Agreements: These agreements allow couples to outline the division of assets in the event of a divorce. While not as common in India as in some other countries, such agreements are gaining recognition and can provide clarity and protection for both parties.
2. Transparent Financial Planning: Engaging in honest and transparent financial planning with a spouse can prevent disputes later on. This includes maintaining separate accounts, clear documentation of ownership, and regular communication about finances.
3. Legal Counsel: Seeking advice from a qualified family lawyer before making any major financial decisions is crucial. A lawyer can guide you on how to legally protect your assets without resorting to risky tactics.
4. Mediation and Amicable Settlements: In many cases, divorce settlements can be reached amicably through mediation, avoiding the need for contentious court battles. This approach allows both parties to have a say in the division of assets and can lead to fair and equitable outcomes.

Conclusion: A Strategy Fraught with Risks

The “Everything in my mother’s name” strategy may seem like a quick fix to protect assets in the event of a divorce, but it is fraught with legal risks and is unlikely to succeed if challenged in court. Indian courts are well-equipped to see through such tactics and will prioritize fairness and equity in the division of marital assets.

Rather than relying on risky and potentially illegal strategies, individuals should focus on legal and transparent methods of asset protection. Consulting with a qualified lawyer, considering prenuptial agreements, and engaging in open communication about finances are far more effective ways to protect one’s interests in the event of a divorce.

In conclusion, while the idea of transferring assets to a mother’s name may offer a superficial sense of security, it is not a reliable or legal solution. The best approach is to prepare for all eventualities with proper legal guidance, ensuring that all actions are within the bounds of the law and that the financial interests of both parties are fairly considered.