Giving money away before divorce

Are you worried about your money during a divorce? You’re not alone – each month, over 8,700 people come to our website for advice. We understand your fears and are here to help.

In this article, you’ll learn:

• Why you need to tell about all your money and things in a divorce.
• What things count as ‘wedding things’.
• How to keep your money safe in a divorce.
• What the rules say about giving money to family before a divorce.
• What happens if you hide money in a divorce.

Our team knows what it feels like to go through a divorce. We understand it’s very hard to think about money at this time, but we’re here to help you. We’ll give you the best advice on how to keep your money safe in a divorce.

Here’s how to protect your money in a UK divorce in 2023.

Is money I give away before divorce considered by the court?

Yes, it could be considered by the court. A court will review the circumstances surrounding a transaction if a family law judge finds you’ve tried to reduce the amount of money in a matrimonial pot.

A court has the power to adjust what’s left in the ‘pot’ so the other party doesn’t lose out.

Even if the transfer is made 3 years before you applied for a divorce, a court could include the amount when they divide assets to both parties!

Note: A court has the power to do this because it is laid out in the Matrimonial Causes Act 1973 – section 37.

Is it illegal to gift money before a divorce?

Both parties in a divorce are obliged by law to disclose all their assets ‘fully and frankly’. When you go to court, marital property and assets must be preserved until an agreement is reached on dividing things.

In short, a court regards gifting money (or anything such as property, stocks, or physical assets) before a divorce to third parties as a way to not pay a spouse their fair share.

The negative impact of doing this could result in:

• Reopening settlements later on
• Legal implications for the party who gifts money before divorce

The rules governing how divorce courts divide money provides them with broad discretion.

A court has the power to examine transactions with third parties. This includes family members if the court believes one party is attempting to reduce the amount in a matrimonial pot.

Not only is not fully disclosing assets or hiding money in a divorce seen as a way not to pay a spouse a fair share, but manipulating financial assets can also have an impact on child support agreements and, therefore, potentially cause harm to children who are involved.

Here, you can see this forum user on MoneySavingExpert is looking for advice on whether he can sell a property to his father at below-market value to prevent his wife from receiving part of its value in their divorce.

What is the penalty for hiding assets in a divorce?

You may face potential criminal penalties for deliberately failing to disclose all your assets during a divorce. Failing to divulge the existence of assets during a divorce can potentially be considered contempt of court, which can lead to fines and even imprisonment.  

Plus, a family court could apply civil remedies when you hide assets during a divorce. Civil remedies refer to the remedy that a party has to pay to the victim of a wrong they commit.

Examples being:

• A family court may reduce your share of the matrimonial pot
• A court could rule you pay your spouse’s legal costs

When is it okay to gift money before divorce?

The rules on giving away money before a divorce are laid out in the Matrimonial Causes Act 1973. According to the law, a court views how money and assets are dealt with during a divorce.

For example, a court will review how and why one party transfers assets unless the following applies:

• The transfer was done by one party who was ‘acting in good faith’
• The party made it for ‘valuable consideration’, which is an equivalent or compensation having value that is given for something acquired or promised; for example, the party gave the money in exchange for a service received.
• That one party wasn’t aware of any intentions on the part of the spouse to reduce (or defeat) a financial divorce settlement

When you can’t pass any of the three ‘tests’, a court could set the transfer aside, but only when it wouldn’t change the amount in a matrimonial pot!

Note: A court has the power to stop transfers when one party is attempting to reduce the amount in a matrimonial pot.

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How are matrimonial assets divided UK?

How matrimonial assets, such as a pension, are divided can vary. But a 50/50 split is an accepted starting point. However, one party in the divorce may get a larger portion of the pot. It depends on their circumstances.

In short, all divorces are decided on their own merits. However, courts have the power to use their discretion so that financial settlements in a divorce are fair to both parties, as well as considering any children involved.

Note: Family law judges refer to the division of a matrimonial post as the ‘yardstick of equality’.

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Can I spend my savings before divorce?

You could, but from my experience, it is not a good idea. A court may frown on the move. A judge may think you’re attempting to deprive your spouse of their fair share of the matrimonial pot.

The outcome of such a move? You could get penalised if you spent or gave away money before the divorce.

Can I empty bank accounts before divorce?

Nobody can stop you from emptying bank accounts before a divorce. But the funds you took out could still be included in a financial settlement. In short, it might not be worth doing!