Undisclosed assets in divorce – what you should know

Hidden assets in divorce: A risk you can’t ignore

Full and frank financial disclosure is a legal requirement in divorce proceedings. However, there are occasions when one party may attempt to conceal assets, potentially jeopardising a fair settlement. This article explores the issue of undisclosed assets, how they may be identified, and the legal remedies available if non-disclosure is suspected.

Why full financial disclosure is legally required

Under the UK Family Law, you have a duty to provide full and frank disclosure during divorce proceedings. This means that you and your spouse have an obligation to completely, honestly and accurately disclose your true financial positions and continue to do so throughout proceedings. Providing full and frank disclosure of all assets from the offset will allow your solicitor to provide you with informed and accurate legal advice, and a more accurate representation as to what a fair and reasonable settlement would be.

Red flags to watch out for during disclosure – assets that are likely to be hidden

There can be many reasons why spouses do not feel it necessary to disclose certain assets. They may feel that their spouse did not contribute to them and therefore, do not want them to be included in the matrimonial pot. If you suspect your spouse is deliberately hiding assets, your solicitor can help you request third-party disclosure, where banks or financial institutions provide relevant records. A forensic accountant can also be instructed to investigate hidden wealth. Seeking legal advice early ensures you protect your rights and secure a fair outcome as your solicitor can help you get to the bottom of your suspicions as early in the proceedings as possible.

Common red flags that may indicate hidden assets include:

• Undisclosed bank accounts– Secret accounts opened in the spouse’s name or under a business entity.
• Undervaluing property or businesses– Claiming that assets, such as property or a business, are valued at less than they truly are.
• Unusual financial transactions– Cash withdrawals, large transfers or sudden changes in financial behaviour.
• Unusual debt claims– Fabricating debts or loan to reduce the value of their declared assets.
• Temporarily transferring assets to friends or family– Moving savings, bonds, investments or property to others during proceedings to avoid disclosure. Sometimes these assets are hidden in offshore accounts.

What the Court can do if assets are hidden

Non-disclosure can significantly impact the negotiation and settlement process and therefore, consequences may include penalties such as cost orders, resulting in the guilty party having to pay additional legal fees.

If evidence can be provided of the dissipation of assets, for example, your spouse has moved or hidden spent money, the court can be asked to take this into account and add back the sum in question to the pot of matrimonial assets as part of your spouse’s share.

In extreme cases, the Court may draw adverse inferences, assuming the guilty party hiding assets and making a judgment accordingly. Further consequences of intentionally disposing of assets, attempting to hide assets or lying within financial remedy proceedings are:

• Being held in contempt of Court; or
• Previous orders being dismissed or changed; or
• Conduct being take into account and the financial settlement being altered in favour of the innocent party.

The consequences of discovering assets after divorce

If it comes to light that a settlement was reached without full disclosure being made, the non-guilty party could make an application to the Court to vary or set aside the Financial Order. Once dishonesty is exposed, it can be difficult to regain the Court’s trust which can result is less favourable outcomes and harsher penalties.

For example, in a recent case, a husband intentionally withheld crucial financial information. He claimed to have no liquid assets and no plans to buy property, but evidence revealed he was already purchasing a property with a potential profit of £3.5–£6.5 million. The judge set aside the consent order due to the husband’s dishonesty.

Family law specialists

Get in touch with our family law team for expert guidance and investigation support if you suspect undisclosed assets. Contact us today on 01202 525333.