Any measure created in contemplation of divorce, or within a relatively short period before it, is potentially reviewable by the court if it is intended to defeat a spouse’s claim for financial relief. The court can set it aside or draw an adverse inference from the creation of legal structures intended to act as barriers to a claim. However, if such a structure sufficiently predates the breakdown of the marriage or can be justified for any other reason, then parties can and should take sensible steps to protect their wealth/assets.

A trust is one such vehicle, but it must not be a sham. If the settlor retains sole control of the trust’s assets and doesn’t consult other trustees, it might be viewed as such. Secrecy, complexity or hidden assets all contribute to the potential failure of the measure to stand up in a matrimonial court.

You can protect shares in a private limited company by the way the company is structured. Classifying shares that cannot be owned by a member’s spouse prevents their transfer on divorce. However, after valuation, offsetting against other assets can still occur, but it does prevent interference by disaffected spouses, which might be harmful to the company.

Inherited or money not derived from the marriage itself – ‘non-matrimonial assets’ can be protected to some degree by keeping it separate. Although it must always be disclosed, placing it in a separate account and avoiding ‘mixing’ with jointly owned assets can provide an extra barrier. The overall need of the claiming spouse may still enable recourse to it, but if not, it may withstand an onslaught.

Finally, there are pre and post-nuptial settlements, the latter more likely to be enforceable but both are still well worth a try. Neither would oust the jurisdiction of the family court but if created in the right conditions, would probably stand up to challenge. Conditions include the taking of legal advice, giving full and frank financial disclosure and being entered into well before the date of the marriage to avoid the challenge of undue influence.

Further information

If you would like further advice or information about financial remedy from a relationship breakdown, please contact Elizabeth Wyatt

Contract management pitfalls – payment
Contract management pitfalls – payment

In the second part of our series on contract management pitfalls, we look at the risks and opportunities presented by payment mechanisms in construction contracts.