TV dramas and tabloid headlines often suggest that when divorce is on the horizon, the sensible thing to do is to start moving money, hiding assets and working out how to keep wealth out of a spouse’s reach. That approach is not only risky but can seriously undermine a person’s position in financial remedy proceedings. The Family Court demands full and frank financial disclosure and attempts to conceal or dissipate assets can have significant consequences. Laura Bailey, solicitor in the family team, explains how individuals can limit the financial impact of divorce without breaching their disclosure obligations or exposing themselves to criticism by the court.

Full & Frank Financial Disclosure

During financial remedy proceedings, both parties have a duty of full and frank disclosure to the court. This means disclosing every asset, every income source, every liability and all property and business interests, even if the other party already knows about them.

Parties will ordinarily provide their initial disclosure via a financial statement known as Form E. Updating disclosure is then required at various scheduled stages of the court process. In addition, the parties have an ongoing duty of full and frank disclosure throughout the entire proceedings. That means that if any of the parties’ financial circumstances change during the proceedings, they must update the other party and the court.

Consequences of non-disclosure

If either party fails to provide complete or accurate financial information, the court can impose penalties, including but not limited to:

• Drawing adverse inferences from a party’s failure to disclose assets;
• Ordering that the party in breach of their disclosure obligations pay the costs of the other party;
• Setting aside orders found to be made in the absence of full and frank financial disclosure from both parties;

Deliberate non-disclosure may amount to contempt of court, with penalties ranging from fines to imprisonment.

It is understandable that someone facing divorce will want to protect their financial position, particularly where they have worked hard to build wealth or are concerned about the future. The important distinction is between taking proper advice-led steps to safeguard assets and taking action designed to conceal wealth to frustrate a spouse’s claims.

Protecting your assets in advance of marriage

There are various mechanisms to protect your assets in advance of and during your marriage, including pre-nuptial agreements, post-nuptial agreements and trust structures. However, once divorce proceedings have been issued, the best protection is a robust, pragmatic and strategic approach to the financial remedy process. Below are some examples of how to navigate financial disclosure whilst protecting your wealth.

Protecting assets in the event of divorce

Identifying Non-matrimonial assets

Matrimonial assets are assets that have been built up during the marriage; these commonly include property, pensions and savings. Non-matrimonial assets are assets acquired before the marriage such as gifts, inheritance, or shares in a family business.

It is often the case that non-matrimonial assets can be excluded from a financial settlement; however, it is important to seek early advice as to what may qualify as a non-matrimonial asset and how they should be treated following separation.

You should also take advice on how to treat assets received post-separation, such as dividends or bonuses, to ensure that they are ringfenced from your financial settlement.

It should be made clear at the initial stages of disclosure which assets you consider are non-matrimonial, and you should expressly state why they should not be considered as part of the financial settlement.

Dealing with Expert Evidence

It is not unusual for experts to be instructed during financial remedy proceedings to value assets. For example, forensic accountants will regularly assist the court in valuing a business interest and illustrating ways in which the business interests may be dealt with.

Understandably, this can be unnerving for those with significant business assets who fear that the expert’s report may not properly reflect the reality of their interests. In those circumstances, it is possible to instruct a shadow expert to provide their opinion, and this can sometimes help in ensuring that a true reflection of the business is presented to the court and that business interests are properly protected.

Any requirement for a shadow expert should be identified swiftly and the correct procedural steps taken to ensure your position is not compromised.

Negotiating Effectively

A good divorce lawyer will be able to negotiate effectively on your behalf and represent your interests assertively. It is important to seek out a specialist who can provide you with tailored advice and who has the expertise and skills to help you navigate the disclosure process.

Where financial circumstances are complex or not easily explained, guidance from a solicitor who is able to respond in a structured and transparent way can make all the difference and ensure that proceedings move forward and your position is protected.

Protection beyond divorce

Protecting wealth during divorce is important, but protecting future wealth is just as critical. Many people assume that financial ties are automatically severed once the Final Divorce Order is made. In fact, those financial claims can remain open unless and until a binding final financial remedy order has been approved and sealed by the court. Whether reached by agreement or through the court process, obtaining that order is essential to protect you against future claims by an ex-spouse.

Protecting your wealth on divorce can feel daunting, particularly where the financial picture is complex or the stakes are high. However, with clear strategic advice and a properly managed disclosure process, it is possible to protect your position without taking unnecessary risks. Our family law team has extensive experience advising clients on complex financial remedy proceedings and can help you take the right steps from the outset. If you are concerned about the financial impact of divorce, please contact us today to discuss how we can help.