Thinking about spending money before divorce? ⚠️ Think twice

When preparing for divorce, understanding how to handle your finances is crucial.

For example, if you’re asking, “Can I spend all my money before or during a divorce?”, it’s important to note that regular, essential spending like paying bills or buying groceries is generally acceptable.

However, larger transactions, such as withdrawing significant sums from joint accounts or giving money away before divorce, could raise concerns.

Courts may scrutinise these actions to ensure fairness and could take them into account when determining a financial settlement.

Can you hide assets before divorce?

In the time during which a married couple has separated but is not divorced, each spouse can spend significant amounts of money from their joint accounts.

So, can you hide assets before divorce?

In theory, this could reduce the overall assets available in the matrimonial pot and therefore eat into the share of money which would be available for the other spouse in the financial settlement.

However, the court will consider the fairness of either spouse spending money before the divorce.

Suppose one spouse is obviously aiming to whittle down the matrimonial pot by excessive spending. In that case, the court can decide they are entitled to a lower percentage of the matrimonial pot, thereby leaving the value of the financial settlement for the other party unaffected.

Will the money I transfer to family members before divorce be considered by the court?

If money is transferred by either spouse to their family members (or other third parties) shortly before the divorce, this can be viewed by the court as a method of intentionally reducing the value of the matrimonial pot.

‘Gifting money’ to family members is not recommended. It can frustrate negotiations and cause disputes.

In this scenario, the court has a wide discretion to adjust the division of the remainder of the pot, to prevent the other divorcing party from losing out in a financial settlement.

This power is set out in section 37 of the Matrimonial Causes Act 1973, allowing the court to review any ‘disposition’ of assets intended to reduce the ‘financial relief’ of their spouse.

In effect, this means that any transfer or gifting of money up to three years before the application for divorce can be taken into account when dividing assets in a divorce.

What’s the best way to spend money before or during a divorce?

Before a divorce, it’s crucial to practice smart financial management. Stick to necessary expenses like mortgage payments, utilities, food, and essential care for children.

Avoid large or impulsive purchases, like expensive vacations or luxury goods, as these could be seen as attempts to reduce the marital estate and may result in penalties during the financial settlement.

It’s also unwise to give away money or make major investments without legal advice.

Keeping your financial behaviour consistent is essential for a fair divorce outcome.

What is the law on disposing of assets before divorce?

Disposing of assets (e.g., selling a house or transferring large sums to family) before a divorce can have significant legal consequences.

Under Section 37 of the Matrimonial Causes Act 1973, if a spouse is found to have transferred or sold assets with the intention of reducing what is available to the other party in the divorce settlement, the court can reverse those transactions.

This is done to ensure fairness and protect the interests of both parties.

For example, if one spouse sold valuable investments just before filing for divorce and moved the proceeds into a private account, the court could order the assets to be returned to the marital estate for fair division.

Can you withdraw money from a joint account before divorce?

In the UK, withdrawing money from a joint account is legally permissible, but it should be done cautiously, especially during a divorce.

Both spouses have equal rights to joint funds, but withdrawing large amounts without the other spouse’s knowledge can cause legal disputes. The court could see it as an attempt to hide or unfairly control marital assets.

To avoid complications, ensure any withdrawals are for necessary expenses, such as mortgage payments or essential living costs, and document them thoroughly. It’s also a good idea to inform your spouse or solicitor about any withdrawals to maintain transparency.

If you suspect your spouse is misusing joint funds, you can apply for a freezing order, which stops further withdrawals and secures the assets until a financial agreement is reached.

How to protect your money during a divorce

The court has the power to impose a freezing order on assets, to prevent transfers of money from taking place, if it thinks one party is contemplating such a disposition with the intention of reducing the financial settlement.

The spouse who suspects this might happen should discuss this with their solicitor so that the court can be made aware and take action if necessary.

If one divorcing party is concerned that their spouse will try and hide documents that prove the extent of their assets, they might try to obtain any relevant information and make copies of documents prior to announcing an intention to get divorced.

But since the 2010 Court of Appeal case of Tchenguiz & Ors v Imerman any confidential information belonging solely to the other party that was obtained without their permission will no longer be admissible, so care needs to be taken when gathering such information.

Is it possible to hide assets such as money and savings?

In theory, it is possible for either spouse to hide certain assets throughout the entire marriage.

For example, if they have a separate savings account, they might choose to keep its existence secret from their spouse.

However, it will often prove extremely difficult to entirely hide the existence of assets throughout the course of a long marriage.

Furthermore, deliberate failure to reveal the existence of assets during divorce proceedings is a criminal offense and can lead to various penalties (see below).

Penalty For Hiding Assets In Divorce

Aside from the potential criminal penalties of deliberate failure to disclose assets during a divorce, there are various civil remedies that might also be applied by a family court.

For example, the court can decide to reduce the share of the matrimonial pot available to the party who tried to hide their assets, or it could even ask them to pay the legal costs of their spouse.

Read our blog Penalty For Hiding Assets In Divorce for more details.

Protecting Your Financial Interests

In a divorce, transparency and fairness are critical when managing joint assets and spending money.

Courts look closely at financial behaviour during the divorce process, so be mindful of how you handle funds.

Any attempt to hide, give away, or dispose of assets can lead to legal repercussions and potentially alter the final settlement. By understanding your rights and obligations, you can help ensure a smoother and fairer outcome.

Always consult with a solicitor for expert advice suited to your case.

How Divorce-Online Can Help You…

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