How are the assets of a married couple protected or controlled during divorce proceedings?

Question

Let's say one spouse is a business owner and is affluent. The other spouse may work part time, but does not have any significant assets in their own name.

Once divorce proceedings have begun, presuming some division of assets will be ordered, how is the less affluent spouse protected from the business owner offloading their business holdings to another family member, or in some way shielding them from the court in order to reduce their financial obligation during the split? Would the court perform a financial audit of transactions in the months or years leading up to the divorce in order to determine an accurate valuation?

Answer 1

british-columbia

The Family Law Act, s. 91 allows a spouse to apply for an order to prevent depletion of family assets. The court may make an order "prohibiting the other spouse from disposing of, transferring, converting, or exchanging into another form, property in which the applicant may have an interest."

Further, even though the default is an equal division of family property, a court can order unequal division if equal division would be significantly unfair (s. 95). One factor that a court may consider is whether a spouse

disposed of, transferred or converted property that is or would have been family property, or exchanged property that is or would have been family property into another form, causing the other spouse's interest in the property or family property to be defeated or adversely affected.

In assessing whether a property protection order is appropriate, or determining whether a spouse improperly depleted family property, a court does not conduct an audit. But the court will want to see detailed financial statements from the parties. Such statements are mandatory under the BC Supreme Court Family Rules. The form is Form F8. Note that it requires disclosure of "all real and personal property disposed of during the 2 years preceding this statement or, if the parties married within that 2 year period, since the date of marriage."

ontario

Ontario has a very similar scheme, set out at ss. 5 and 12 of its Family Law Act.

Answer 2

australia

All assets and income must be disclosed

Property settlements are typically negotiated between the parties and approved by the court rather than being imposed, although that is an option where negotiation, mediation, or voluntary arbitration has failed.

Parties have a duty to provide full information - ‘disclosure’ - about their income and assets. A failure to give full and frank disclosure has serious consequences. These consequences may include:

• any consent orders being set aside
• the court adjusting a property settlement in favour of the party who has provided full disclosure
• having to pay the other party’s legal costs
• being fined, and
• being charged with contempt of court (which can result in imprisonment).

A deliberate attempt to hide and dispose of income-producing assets like a business would be the type of thing that gets you sanctions towards the bottom of the list above.

Assuming the business had been transferred for less than market value, the court would simply order the mother to either transfer it back or pay market value. If a fair price had been paid, then that cash would be available for division.