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 to dissipate matrimonial assets, either prior to 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. 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.<span class="su-quote-cite"><a href="https://cunningtons.co.uk/locations/wickford/family-law-solicitors-wickford/" target="_blank">Marie Groves, family law paralegal at Cunningtons, Wickford</a></span>

What is dissipation in the context of 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 cryptocurrency;
  • Mismanaging their finances, like gambling or getting into debt;
  • Extravagant spending that is atypical, such as buying luxury holidays and other purchases;
  • 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 a divorce. Obtaining early expert advice is beneficial in most circumstances, however, it is often vital in this situation.

Cunningtons’ 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 reasons you believe 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 register a Restriction against the property title by making an application to the Land Registry. Once registered, it will mean that the land cannot be transferred without prior notification to you.

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 market value, then although that particular asset 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 the value of that gift needs to be weighed up against the value of the overall assets available.

For example, it is unlikely to be proportionate to seek a freezing order if your spouse intends to gift an asset which only makes up five per cent of the available matrimonial assets. This is because there are sufficient assets left over to still achieve a fair settlement or division of assets.

What if assets have already been transferred?

The court has the power to set aside transactions where one spouse has been disadvantaged by the actions of dissipating assets by the other spouse. Typically, the court will put the spouse who has been wronged into the position they would have been in, 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.

Contact us for further guidance

If you need to discuss any aspect of financial settlement and divorce, contact our Family Law team for advice. All discussions are confidential, and our family law solicitors are friendly and experienced.

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