Asset Transfers: “If I Transfer Assets to a Third Party, the Court Will Ignore Them”

Why Transferring Assets to Third Parties Won’t Protect You in Divorce Settlements

A common myth in divorce proceedings is the belief that transferring assets to a third party, whether a relative, a trust, or an offshore account, will shield those assets from scrutiny or division. It’s an attractive idea for some, especially when emotions run high and financial stakes are significant. But the reality is far more complex, and the consequences of relying on this misconception can be serious.

Understanding how the courts treat asset transfers is essential for anyone going through a divorce. More importantly, seeking expert legal advice before taking any action can prevent costly mistakes that may be difficult or even impossible to undo.

Myth: “If I Transfer Assets to a Third Party, the Court Will Ignore Them”

This myth persists because it seems logical; if an asset is no longer in your name, surely it’s no longer yours? Some individuals believe that by gifting property to a family member, moving funds into a trust, or selling assets at undervalue, they can reduce their financial footprint and avoid sharing those assets in a divorce settlement.

Unfortunately, this approach not only fails to achieve the intended result but can also backfire significantly. Worse still, trying to fix the situation after the fact can lead to serious legal and financial consequences.

Reality: Courts Look Beyond the Surface

Under Section 37 of the Matrimonial Causes Act 1973, the court has robust powers to prevent and reverse attempts to frustrate a fair financial settlement. If a spouse transfers assets with the intention of defeating the other party’s financial claim, the court can intervene in two key ways:

1. Setting Aside Transactions Made Within Three Years
   If a disposition (such as a gift, transfer, or sale) was made within three years before financial remedy proceedings began, the court may presume wrongful intent. In such cases, the burden shifts to the transferring party to prove that the transaction was made in good faith and not to defeat the financial claim. If the court is satisfied that the transfer was intended to reduce the matrimonial pot, it can set aside the transaction and restore the asset to the pool for division.
   
2. Freezing Assets to Prevent Dissipation
   Where there is evidence that a party is about to dispose of or transfer assets, the court can issue a freezing injunction. This order restrains the party from dealing with the asset and preserves its value until the financial proceedings are resolved. Freezing orders can apply to a wide range of assets, including bank accounts, property, shares, and even assets held offshore or by third parties.

These powers are designed to ensure that the financial settlement reflects the true value of the matrimonial estate and that neither party can undermine the process through concealment or manipulation. Such injunctions can be costly though and the party who has assets frozen will usually end up bearing those costs if it is proven that they were about to dissipate a matrimonial asset.

What Counts as a Third-Party Transfer?

Courts scrutinise a wide range of asset transfers, including:

• Gifts to family members (e.g., transferring property to adult children or siblings)
• Trust arrangements, especially if the settlor retains control or benefit
• Offshore accounts or foreign investments
• Sales below market value, which may be treated as disguised gifts

Each of these can be challenged if the court believes the transfer was made to frustrate a fair financial settlement.

Consequences of Attempting to Hide Assets

Trying to conceal or divert assets can have serious repercussions:

• Legal consequences: Courts may draw adverse inferences, impose costs orders, or reverse transactions.
• Credibility damage: A party found to be dishonest may lose the court’s sympathy, affecting the overall outcome.
• Financial penalties: The court may compensate the other party with costs orders or adjust the settlement to reflect the hidden assets.

It’s also important to understand that financial disclosure is a standard part of divorce proceedings. Parties are typically required to provide 12 months’ worth of statements for all bank accounts, investments, and other financial holdings. This means that unusual movements of funds, such as large withdrawals, transfers to third parties, or sudden asset disposals, are likely to come to light. Attempting to hide assets or money not only risks exposure but also undermines your credibility and position in negotiations.

Most importantly, once such steps have been taken, unravelling them can be complex, expensive, and damaging to your case. That’s why it’s crucial to seek legal advice before making any decisions about your assets.

How to Handle Asset Division Transparently

The best approach is always one of full and frank disclosure.  This is not only a legal requirement but also the foundation for a fair and sustainable resolution.

Working with a specialist family lawyer ensures that your interests are protected without resorting to risky or unlawful tactics.  There are legitimate and constructive ways to achieve a fair financial outcome and sometimes there are valid arguments to be advanced about whether certain assets could be excluded from sharing or division because of when they were accrued or whether they’re actually needed.  Trying to hide such assets will often prevent the credibility of such arguments.  There are a variety of ways in which we can help protect assets:

• Tailored legal advice – to help you understand your rights and obligations before decisions are made
• Negotiation through solicitors – ensuring your position is clearly presented and legally supported
• Non-court dispute resolution – processes such as mediation or arbitration can offer a more private, flexible and efficient way to resolve financial matters without the delays and costs of litigation.

Final Thoughts: Don’t Fall for the Myths

Transferring assets to third parties in the hope of avoiding financial responsibility during divorce is a dangerous myth. Courts are equipped to see through these tactics and will act to ensure fairness.

If you’re considering any financial steps in anticipation of divorce, speak to us first. Early legal advice can help you avoid costly mistakes and ensure your position is protected from the outset. At Machins Solicitors, we specialise in all types of matrimonial finance cases and can guide you through the process with clarity, integrity, and professionalism.

About the Author

Laura is a Senior Associate Solicitor at Machins, specialising in family law since 2013. She is a Resolution-accredited specialist in Complex Financial Remedy (low to medium net worth) and Private Law Children cases, and was recognised as a ‘Key Lawyer’ in the Legal 500 (2025). Known for her pragmatic and empathetic approach, Laura is particularly sought after for her expertise in pensions on divorce and complex financial settlements.