Preventing the dissipation of assets in divorce
16th August 2023 by Jonathan Talbot
Divorce can often stir up feelings of mistrust between former spouses, especially when it comes to considering the financial division of assets. Sadly, it is all too common that one spouse will try and dissipate matrimonial assets, either prior to a separation or during divorce proceedings, in the hope of minimising the amount of money that they have to provide to their former spouse.
‘However, divorce lawyers and judges are well versed in the wide range of devious tactics that people try to employ to hide their wealth,’ says Jonathan Talbot, head of family law at Laceys Solicitors. ‘The Family Court is aware that this happens, and there are steps that can be taken to protect your entitlements. Often these steps will need to be taken urgently and therefore obtaining early expert advice is essential.’
What is dissipation in the context of a divorce?
Dissipation of assets in divorce means that one spouse has sold, transferred, or otherwise disposed of property that should be taken into account when considering the division of matrimonial assets to arrive at a fair financial settlement.
Some of the common ways in which a spouse may try to dissipate assets include:
- transferring assets at an undervalue or for no value;
- gifting assets to friends or family;
- moving assets abroad or trying to hide assets in other ways such as investing in crypto currency;
- mismanaging their finances, such as gambling or getting into debt;
- extravagant spending that is atypical, such as luxury holidays and purchases; and
- large or unexplained cash withdrawals.
What can be done to stop dissipation?
The saying, ‘prevention is better than the cure’ is true when it comes to dissipation of assets in divorce. Obtaining early expert advice is beneficial in most circumstances, however it is often vital in this situation.
Our family law team has a wealth of experience and will be able to advise you on the best steps to take for your circumstances. This may mean applying to the court for an urgent freezing order.
A freezing order is a type of injunction made by the court which will prevent the unauthorised dissipation of the assets it relates to. When making an application, it is necessary to explain the reasons why the injunction is needed. This usually includes details of the matrimonial assets, what assets are suspected to be at risk, and the reason for the belief that the assets are at risk.
This order is typically applied for on an ex-parte basis, meaning that your spouse is not notified of the application until after the order has been made. An initial order is usually only made for a brief period of time, with a further court date being set to allow them to respond to the order.
The court will permit your spouse to access some of their assets while the order is in place. This is to allow them to continue with their usual day-to-day living expenses, including the management expenses of any business they may own.
If your concern relates to the transfer of land, then an alternative option may be to apply for a Matrimonial Homes Act notice of entitlement to live in a property as a husband or wife of the registered owner. Once registered, it will discourage any third party dealing with the property to the detriment of the spouses interest in the property.
Taking proportionate steps
It is important to appreciate that not all assets that are transferred or sold will amount to a dissipation where legal action is warranted. For example, if your spouse is selling land or property at a market value, then although that particular assets may no longer be available, a monetary sum will instead be available. In these circumstances it may be more appropriate to seek that the balance monies from the sale are held pending resolution of the divorce. Preserving the actual asset will most likely not be needed.
If your spouse is gifting an asset to a friend or family member then the value of that gift needs to be weighed up against the value of the overall assets available. For example, it most likely will not be proportionate to seek a freezing order if your spouse intends to gift an asset which only makes up five per cent of the matrimonial assets available. This is because there are sufficient assets left over to still allow for a fair settlement or division of assets to be achieved.
What if assets have already been transferred?
The court has the power to make adjustments in any order to reflect that one spouse may have been disadvantaged by the actions in dissipating assets of the other spouse. Typically, the court will put the spouse who has been wronged into the position they would have been, had it not been for the dissipation.
That is all well and good when there are still sufficient assets left to allow for this. But, what if the dissipated assets make up the entire or a significant portion of the matrimonial assets? In those circumstances, the court can look to set aside the transaction, which means it can cancel or revoke the transaction to bring the assets back within the matrimonial pot. To do this, the court must be satisfied that the transaction occurred with the intention of defeating a matrimonial claim. For any transfers that occurred in the three years prior to the issuing of proceedings, the court will assume, unless the contrary is proved, that the intention was to defeat the matrimonial claim. This puts the onus on your spouse to prove that was not the case.
How we can help
If you are worried about your spouse dissipating matrimonial assets, or have noticed unusual financial behaviour, it is vitally important that you obtain urgent advice from one of our family law experts, please contact us on 01202 377800 or email j.talbot@laceyssolicitors.co.uk
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published
Jonathan Talbot
Partner — Family
Direct dial: 01202 377844
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“Jonathan has been amazing at helping me get a resolution with my ex-husband. He was a great listener when I was getting very upset about clauses in our old divorce agreement that were not being adhered to and reacted really quickly with a letter and support. I would not hesitate to ask Jonathan for help again but please excuse me if I hope that doesn’t happen for a while as we all know dealing with ex's is never much fun! Thank you Jonathan.”
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“Very happy with how you dealt with my case. Many thanks for your help and advice from Mr Talbot and his secretary.”
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“Jonathan Talbot explained the process and how things would proceed. He was very patient allowing us time to understand and adapt to our new situation. Legal language can be quite difficult to understand and he would explain what it meant and how it would impact.”
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“I always use Laceys for my legal work, I feel able to talk to them and I know they listen. They have always been professional and kind.”
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“I’d like to extend heartfelt thanks to you and Shannon for helping me through this difficult time, I am really very appreciative to have had you on my team this year, you’ve been an enormous support. ”
Jonathan heads up Laceys family department and having qualified as a Solicitor in 1983, he has over 35 years experience in Family Law.
He specialises in Family and Relationship Breakdowns, Financial Remedies, Collaborative Law and International Family Law.
Jonathan has a exceptional caring nature and will always strive to find solutions to family issues outside of the court if at all possible.
Outside of work Jonathan likes to keep himself busy by competing in Ironman 70.3’s when he gets the chance – which are no easy feat at having to complete a 1.2 mile swim, a 56-mile bike ride, and then a 13.1 mile run each race!
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