03 Sep Transferring Property To Reduce The Asset Pool
After separation, a party may attempt to reduce the asset pool before they are going to divide the matrimonial property.
They may do this by transferring it out of their name in order to ‘protect’ them from the property settlement.
Disposal of property can occur by way of sale, transfer, assignment or gift. This is often done without consultation with the other party or prior notice.
This can result in skewing the overall property settlement unfairly in favour of the party responsible for the disposal.
In considering how to divide the property, the Courts must establish what assets and liabilities make up the combined asset pool.
This includes all property and liabilities which is held, controlled or owned by you and your former partner prior, during or after the duration of the relationship.
What happens if I sell my assets to reduce my property pool?
Rule 13.01 of the Family Law Rules 2004 require each party to give ‘full and frank disclosure of all information relevant to the case, in a timely manner’.
Regarding the disposal of an interest in a property, Rule 13.04 of the Family Law Rules 2004 states that the party disposing of their interest must provide disclosure to the other party if the transaction occurs in the 12 months immediately prior to separation or any time after separation.
Disclosure of information to the other party can be by producing documents, disclosing financial circumstances or responding to relevant questions.
It is important to note that Rules 13.01 and 13.04 of the Family Law Rules 2004 do not stop a party from ever making any transactions in the period after separation and before finalisation of the property settlement.
Parties can do so, but they must keep the other party up to date if they dispose of any interest in their property. They must do so by providing ongoing disclosure during the property settlement proceedings.
Can I transfer property out of my name to reduce the asset pool?
Another issue that arises in family law matters, is when a party disposes of property under market value or potentially even for free.
This will deplete the value of the asset pool.
If so, the other party to the proceedings can produce evidence in relation to that transaction.
If it is proved that the transaction did not receive a return, or the return was less than the market value, the Court may take into account the shortfall amount and ‘add back’ the value to the other party.
Alternatively, the Court may also consider the transaction when calculating the ‘just and equitable’ distribution of property.
If the unprofitable transaction is considered as ‘wasting’ the previously owned asset, the Court may exercise discretion in splitting the property more heavily towards the party not responsible for the disposal of interest.