The short answer is yes – they could. There is an obligation on both parties in a divorce to disclose assets fully and frankly. And courts need marital property to be preserved until it reaches a final decision that is fair to both sides. Transfers of assets to family members or third parties before or during the process could be seen as a way to reduce the pot available for division in any financial settlement or court order.
We have previously discussed the implications for a spouse who attempts to hide assets and his or her actions are subsequently discovered. These include reopening of settlements in the future and negative cost consequences for the offending party.
But is the situation any different when, instead of hiding assets, one spouse decides, whether transparently or not, to transfer assets to a third party?
The Family Court’s Wide Discretion
Divorce courts have a wide discretion to make property adjustment and other orders when making decisions on financial matters. And this extends to examining transactions with third parties, including family members, that have reduced the assets of one spouse. The relevant rules are contained in the Matrimonial Causes Act, 1973. They state that any disposition made by one spouse in financial relief proceedings can be ‘reviewed’ unless:
- it was made for valuable consideration
- it was made to a person who was acting in good faith
- that person was unaware of any intention of the spouse to defeat or reduce a claim for financial relief.
If the spouse making the disposition cannot satisfy these tests the court can ultimately set the disposition aside. But it will only do so if satisfied that the undoing of the transaction would result in a different financial settlement.
The court also has the power to prevent transfers taking place if it thinks one party is contemplating such a disposition with the intention of reducing the financial relief available.
A Word Of Warning
In situations like this it is essential for a spouse who is suspicious to obtain specialist legal advice as a matter of urgency. Failure to do so could result in it being difficult to bring assets back within the jurisdiction of the courts. Sometimes it is tempting to take matters into your own hands and investigate your spouse’s financial affairs surreptitiously. But it is never a good idea to access documentation or computer records belonging to your spouse without consent. It could damage your position by undermining your position in the eyes of the court and even open you up to the possibility of criminal or civil charges.