How to protect assets from divorce

Divorce solicitor, Sarah Holbrook takes a look at options available when looking at how to protect assets on divorce.

When a couple divorce, the Family Court has discretion to look at all the assets owned by either spouse and decide how to divide them based on what they think is the fairest outcome for both parties. However, this does not guarantee that the Court will consider the origin of an asset or distinguish between assets acquired before and during the marriage.

In order to avoid this, steps will need to be taken to protect the assets being brought into the marriage. The best time to do this is before separation is even a consideration.

For those couples who have not already married, the best protection to put in place is a pre-nuptial agreement. While not yet legally binding in the UK, a pre-nuptial agreement that is properly prepared and fair to both parties, can ensure that assets, such as family wealth or those acquired prior to the relationship, are retained by the person who introduced them to the marriage.

Entering into these types of agreement prior to marrying ensures both parties are clear on where they stand financially from the outset. This however is not always possible or is not relevant at the time of the marriage.

If an asset is not received until after marriage, arrangements can still be made to protect it upon divorce.

If there is a likelihood of receiving a large amount of money e.g. parents wishing to provide an early inheritance, then the following can be considered:

• Post nuptial agreement
  This is exactly the same as pre-nuptial agreement, but it is signed after the marriage. Like a pre-nuptial agreement, they are not legally binding but they are highly persuasive evidence of the agreement reached and will usually be followed as long as they are properly prepared and are fair to both parties.
• Declaration of Trust
  If the money being provided is going to be put towards purchasing a property, you can enter into a Declaration setting out that the third party has a financial interest in the property and they need to be repaid on any separation. They can also consider registering a charge against the property.
• Trusts
  Setting up a discretionary trust is an option to protect assets form a future divorce and is often used when a family wishes to ensure their wealth is passed on to future generations. This however is a complex area and if you are considering this as an option then expert legal advice should be sought to ensure that this is approached correctly.
• Gift or Loans
  If a spouse is being provided with a sum of money, especially where it’s from a family member, consideration needs to be given to whether this should be treated as a gift or a loan. In the absence of any agreement, the Family Court are likely to treat the money as a gift to the couple and include it in the matrimonial division. If the intention is for this person to receive their money back, the provision of this money could be treated as a loan and ideally, a formal loan agreement should be prepared setting out the terms of repayment.

Where separation has already occurred, it may be too late for any of the above to be implemented, but the approach taken to the financial settlement process can be instrumental in protecting accumulated assets and avoid paying out unnecessary amounts to your spouse.

Early advice from a specialist divorce lawyer regarding your legal rights and responsibilities can be invaluable in the decision making process when considering the desired final outcome, and which assets will be a priority in the financial settlement negotiations.

Depending on the owned assets, obtaining expert advice from other professionals, such as financial advisors, pension on divorce experts, tax advisors etc, may be advantageous. In doing so, the financial settlement can be organised in a fair and efficient way.

Whatever the chosen approach, we strongly urge against hiding or transferring assets to avoid them being considered in a financial settlement. It is highly likely an opposing solicitor will spot any attempt to hide assets when checking the financial disclosure required upon divorce. If discovered, any attempt at hiding assets could compromise the overall settlement and will certainly be starting off on the wrong foot in any court proceedings that may be issued.

The best protection available to you will depend on your individual circumstances so if you would like further advice, please contact our expert team of family law solicitors who can arrange a consultation with you to discuss the best next steps.