Shivi Rajput, a seasoned divorce lawyer with over 13 years of experience, has encountered a wide range of complex situations in her career. She has witnessed disputes over joint finances, with some ex-spouses even attempting to take drastic actions against shared assets, including artwork and even sentimental items like their children’s baby teeth.

While divorce has always been fraught with emotional and financial troubles, Rajput, a partner at Stowe Family Law, has observed an alarming trend. More clients are resorting to dishonesty about their financial assets during divorce proceedings.

The rise of technology and artificial intelligence has enabled some individuals to digitally manipulate financial documents to obscure their wealth from their ex-partners. This practice is becoming more common, though it varies in its effectiveness.

“One of my clients noticed an unusual entry on her husband’s bank statement. Upon further investigation, we discovered a transaction listed under September 31, a date that does not exist. We are currently seeking a court order to obtain his bank statements directly from the bank for an accurate comparison,” Rajput explained.

Altering financial documents might seem enticing, but the consequences can be dire. Rajput cautioned, “If caught, you face potential prison time and irreparable damage to your credibility in the divorce process.”

Statistics suggest that nearly 40% of marriages and civil partnerships in the UK result in divorce. In 2022, over 80,000 divorces were finalized in England and Wales, highlighting the frequency of this legal transition, as stated by the Office for National Statistics.

Divorce proceedings can be drawn out, often requiring an average of 45 weeks to finalize after a “final order” is issued by the courts, according to the Ministry of Justice. For couples struggling to agree on property division and custody arrangements, the timeline can extend even further. A cooperative approach simplifies the process, reducing potential legal fees, yet complications often arise. Below, we explore the common pitfalls that separating couples encounter in divorce.

Undisclosed Assets and Financial Deceptions

During divorce proceedings, it is crucial for both parties to provide a comprehensive account of their financial circumstances to ensure a fair division of assets. Required documentation typically includes bank statements from the last 12 months, pension valuations, the latest mortgage details, three months of payslips, and a P60.

In severe instances, withholding financial information can result in criminal charges. Nonetheless, many divorce lawyers report that this issue frequently arises.

Deborah Jeff from Simkins LLP noted, “Hiding assets is a form of financial misconduct, which could lead to penalties during financial settlements or cost orders against you.”

She recounts a case in which a client tried to conceal £2 million he transferred to his twin sister. “This came to light during the financial disclosure, and the judge did not take kindly to it,” she said.

There are often cases where only one spouse manages the finances, leading the other to suspect hidden assets during the divorce. Jeff stated, “When trust dissolves, doubts about adequate financial disclosures can prolong the process, which is unfortunately quite common.”

Individuals accustomed to managing their finances may resist court requirements. “One client refused to fully complete a questionnaire required by the court, resulting in an order for her to pay costs of around £7,000. Although it might not seem substantial in the greater context, it was an unfortunate situation,” she added.

Ensure a Solid Prenuptial Agreement

Prenuptial agreements, while not legally binding, are considered by courts during asset distribution and can expedite divorce proceedings, ultimately saving both parties on legal expenses.

Such agreements are established prior to marriage or civil partnerships to outline asset division in case of divorce. Although they lack romance, legal experts advocate for these contracts.

It is essential for both parties to seek proper legal guidance before finalizing a prenup, as improperly executed agreements can delay the divorce process. Also, proper signing of the document is vital.

This is particularly important when assets are located in different jurisdictions; if no legal counsel has been sought in those areas, the agreement may be ineffective.

Rajput emphasized the importance of having an enforceable and valid agreement, stating, “Otherwise, it could be a waste of resources.”

Postnuptial agreements serve the same purpose as prenups but are executed after the marriage. These are often created following significant life changes, such as a substantial inheritance, and like prenups, must be accurate about asset disclosure to maintain validity.

Guard Against Trust Issues

While trust is essential in relationships, remaining vigilant during a divorce is crucial.

It is wise to protect shared financial resources by considering measures such as freezing joint bank accounts or credit cards to prevent one party from depleting joint savings or accruing debt. Banks can implement safeguards requiring both parties’ signatures for withdrawals.

McLynn noted, “We had a client whose husband owned their home solely in his name. We advised her to register a charge to prevent him from selling it, but she was hesitant to cause conflict.”

“Unbeknownst to her, he sold the property, taking approximately £500,000 with him to Hong Kong,” she disclosed.

In another case, Rajput recounted a wife who left the family home while her husband remained with their children. The husband removed all her belongings, including valuable artwork and cherished personal items, and stored them without revealing where they were kept.

Rajput stated, “Upon her return, all her possessions were missing—her jewelry and even her children’s keepsakes. Regrettably, it took a year to recover everything.”

Don’t Overlook Pension Matters

Pensions are typically among the most significant assets in a divorce, classified as joint property, and are usually subject to division.

When couples struggle to find common ground, courts may issue a pension sharing order, determining how pension funds are allocated. This could result in a loss for the partner with the more substantial pension.

Rajput advised, “Timely implementation of a pension sharing order is critical. Delays can lead to increased pension value, impacting the division favorably for the other spouse.”

Implications of Moving Out

Rajput cautioned that moving out of the family home may come with financial ramifications, including the loss of valuable tax exemptions when selling the property later.

Private residence relief allows individuals to sell their primary residence without incurring capital gains tax on profits, provided it has been their main home throughout ownership.

If the residence sells within nine months of one spouse moving out, the tax relief is preserved. However, if sold later, the relief could diminish, requiring tax payment on any gains.

Nonetheless, specific provisions allow individuals to maintain tax relief if they relinquish their interest in the home to their ex-spouse within three years post-separation as part of the divorce settlement.

The spouse remaining in the family home retains the tax benefits.

“Although cohabitation during a divorce can be challenging, moving out can lead to significant tax concerns,” Rajput stated. “It can also alleviate pressure on the partner still living in the property to expedite the divorce settlement.”