Disposing or dissipation of assets before a divorce settlement occurs when one spouse disposes of assets by selling, spending, or transferring assets in a deliberate attempt to prevent them from inclusion in a divorce financial settlement. Disposing of assets can take many forms, including:
- Selling assets before divorce in the UK at an undervalued price
- Transferring assets into the name of another person
- Gifting money or property to friends and family
- Transferring assets abroad
- Making large and unexplained cash withdrawals
- Unnecessary expenditure for excursions and luxury items, and
- Gambling and getting into debt
Disposing of assets before a divorce settlement, for example, by giving money away prior to divorce, can lead to serious legal consequences. This is because the courts take any attempt to deny a divorcing party a fair share of what they are owed extremely seriously. The potential penalties for dissipating assets before a divorce settlement with the intention of ensuring they are not included in the ‘marital pot’ include:
- Giving a larger share of the marital assets to the other party than they would otherwise have received.
- Ordering the undoing of the disposal in question and
- Including the person who received the assets within the settlement proceedings.
However, the dissipation of assets will not always lead to or necessitate legal action. For example, if your husband or wife sells an asset at market value, then preserving the asset may not be warranted because the money will be available for inclusion in the divorce financial settlement. Similarly, if your ex-spouse decides to gift a relatively small amount of money compared to the overall level of marital assets, the court may consider there to be enough funds to achieve a fair divorce asset split and require no legal intervention.
In summary, disposing of assets before divorce may lead to penalties or court interventions, but in some cases, it may result in assets being hidden. It is recommended to talk to a divorce lawyer if you are concerned about your spouse disposing of assets before your divorce settlement is reached.
How to stop the disposing of assets in a divorce
Some of the most common legal ways to prevent the disposal of assets in a divorce include:
- Freezing injunction orders, and
- Register notice with the Land Registry
Freezing injunction order
If you have a genuine concern that your husband or wife is planning to sell assets before your divorce settlement, you can ask the court to issue a Freezing Order. A Freezing Order (or injunction), previously called a Mareva injunction, is a legal document issued by the courts to prevent the disposal of assets by the respondent. A Freezing Order can be used to preserve assets in England and Wales only (domestic Freezing Order) or worldwide (worldwide Freezing Order (WFO)). The courts will typically only issue a Freezing Order if:
- There is an underlying legal or equitable right
- The applicant has a sound arguable case
- The assets exist, and
- There is a risk of dissipation.
Register notice with Land Registry
If there is a concern that your husband or wife is planning to sell the matrimonial home or another property in which you have an interest, you can register a matrimonial home rights notice with the HM Land Registry. This places an alert on the Land Registry database so that anyone searching for the property title will be informed that you have a declared interest in the property. As such, any sale of the property cannot proceed without your express permission.
What to do if an asset dissipation in a divorce has already happened
If the asset dissipation has already taken place, the court may issue an Avoidance of Dispositions Order in accordance with section 37 of the Matrimonial Causes Act 1973. In order for this to happen, there must have been a ‘reviewable disposition’. A reviewable disposition is one where there has been a transfer of ownership or possession from one person to another (e.g. property or gift) with the aim of defeating the financial claim of a wife or husband during divorce proceedings.
It is important to note, however, that an Avoidance of Disposition Order is not always the best legal route. If your partner has disposed of assets but their remaining assets are enough to meet your divorce financial settlement needs, it may be more appropriate to claim for ‘add-back’. The court can order an ‘add back’ so that a husband or wife who dissipates an asset is required to add back into the pot the amount they reduced the marital assets by.
