When people separate, it is important that they come to an agreement on the division of their assets and liabilities held at the time of their separation. The next step is to have that agreement formally drawn up to protect them from any legal action in the future.
Unfortunately, we have had many clients come to see us who do not have information about all of the assets and liabilities held by their former partner. Or, our client no longer trusts their ex-partner and are worried that that person will hide some of their assets.
Examples of hiding assets in Family Law matters
People try to hide their assets in the following ways:
- By failing to properly disclose their assets (including superannuation entitlements);
- By hiding money or assets, especially in relation to cash earned from businesses;
- By wasting assets through excessive expenditure or mismanagement of a business;
- By selling assets or increasing debts;
- By using Family Trusts to protect assets
How and why do people hide assets in Family Law matters?
More often than not, one party tends to manage the finances of the relationship, and the other party is unaware of the parties’ joint financial situation, or the individual assets owned by the other partner.
Unfortunately, people try to maximize what they get out of their property settlement by trying to keep some of their assets separate or hidden from the property division.
How do lawyers help stop the hiding of assets?
When we meet with our clients initially, we recommend that they contact their bank to discuss their situation and put restrictions on accounts to ensure that the other party cannot draw out large sums of money or transfer money without their consent.
We then conduct Company and Land Title searches to obtain information about entities or properties owned by the parties.
Next, we try to ascertain the total value of the assets and liabilities of the parties, so we write to the other party or to their lawyer and we request copies of disclosure documents. We also check bank statements and other documents to ensure that there are no unusual transactions.
It is important to note that parties in Family Law cases have a duty to disclose all relevant documentation in their possession or control. When parties refuse or fail to provide all of their relevant documentation, we issue subpoenas to banks and other organisations to obtain the information.
We can also obtain evidence from witnesses or other sources, and in the case of Trusts, we can look at who actually controls the trust and who the beneficiaries are.
In some cases, we will require the other party to sign an Undertaking to confirm that they will not dispose of or deal with assets against our client’s interest.
Lastly, we can contact the party’s superannuation fund to obtain information about the entitlements of our client’s former partner. The government is currently considering changes to legislation that will enable us to obtain a court order for the Australian Taxation Office to provide us with the other party’s superannuation fund details.
What are the consequences of hiding your assets?
We have found that in many instances when our client thinks there is a ‘golden goose’ hidden away somewhere, we discover that this is not the case. In fact, what often happens is that the other party has spent the money they have hidden or made from the selling of assets.
However, this can be taken into account in the division of property by ‘adding back’ that asset into the pool of assets. This reverse equation results in the other party essentially spending their part of the share already, which means our client doesn’t lose out.
In some cases, we are able to show that someone has been hiding or not correctly disclosing their assets, and in those cases, the court may punish that party by:
- Fining that party; or
- Determining that the party is not a credible witness in their own case; or
- Staying or dismissing part of their case; or
- Awarding some costs against the party that they then have to pay some of the other party’s legal fees; or
- In the more serious cases where parties have hidden significant assets, it has changed the outcome of the case, and the court has awarded a greater share of the asset pool to the other party.
If assets are found to be hidden at a later stage, an order for property settlement can be set aside. Likewise, if your ex-partner finds out later that you hid assets, they could take you back to court to try and get a greater share of the property division.
Overall, it’s in everyone’s interest to be upfront about their financial situation and come to an agreement early on the division of the assets and liabilities held at the time of their separation.
If you’re going through a separation or divorce, our Family Law team are here to help walk you through the process. If you want to hear more on this topic, I recently discussed these issues with Sonya Feldhoff on ABC Adelaide radio – click here for the link to the interview.