Offshore assets include any asset - whether a property, bank, investment or pension savings account or otherwise - located outside your country of residence. These assets may also include corporate wealth overseas, for example, a financial interest in a company or trust.
To be considered in a divorce context, an offshore asset should be part of the couple’s "matrimonial property". This generally means an asset that was acquired during the marriage and/or enjoyed by both parties during the marriage. Property that was acquired by one party before the marriage, or that was inherited by one party before or even during the marriage may be excluded from consideration; however, each case will be considered in its specific context to ensure fairness.
Dealing with the division of offshore assets is more challenging than domestic assets even in a straightforward divorce, because of the differing legal and tax rules that apply in other jurisdictions. Post Brexit, this can be the case even where an asset is located in a nearby EU country.
These challenges increase in proportion to the number of offshore assets held, the type of offshore asset (for example, whether it is an overseas holiday home or a financial interest in an offshore corporation or trust), and the degree to which the owning party/parties are willing to cooperate with disclosure early in the proceedings.
Further complexities include:
- disclosure issues
- increased legal and other costs
- valuation issues
- additional court orders required, and the enforcement of those orders overseas
Proper and professional valuation is an essential part of divorce proceedings to ensure that assets are divided fairly between the parties. Otherwise, there may be real risks of unfair division, reasons to challenge orders, and reopen proceedings later down the line.
The recommended route for the valuation of assets, particularly in a high-value divorce, is for the parties to hire an expert accountant jointly. This increases transparency and reduces the risk of conflict. In the case of offshore assets, it will often be necessary to engage valuation experts from the relevant jurisdiction, whether these are local real estate agents for an overseas property, or - for more complex corporations or trusts - expert accountants familiar with the jurisdiction’s legal and tax rules.
Offshore assets are treated like any other asset in a divorce. The default position for the division of assets is an equal split between the couple. In reality, however, each party will have differing income and financial needs. For example, one party may have been the primary carer for the couple’s children and have given up their career/earning potential. If the wealth tied up in offshore assets is difficult to release, it may be open to the court to award a greater share of domestic assets towards the other party.
Full and frank disclosure of each of the party’s financial resources is one of the fundamental steps in a divorce process, whether the divorce is taking place through agreement or proceeding through the court.
Unfortunately, at least one party may take steps to conceal the full extent of their assets. This can be particularly common in acrimonious and high-value divorce proceedings where one partner primarily manages the couple’s money, owns a business (particularly an overseas business) or has a significantly higher income. Non-disclosure is a serious issue and may result in a lesser financial settlement for the guilty party and, in more serious cases, in an order for contempt of court which can carry a prison sentence.
Hiring a professional forensic accounting expert in these cases can be invaluable as they can:
- Closely examine financial statements and other documents for detailed information/inconsistencies
- Uncover and trace disguised assets at home and overseas
- Prepare accurate estimates and valuations
- Determine which assets fall into the matrimonial property category
UK Courts can make orders in relation to offshore assets, including orders to compel disclosure of the details of offshore assets, orders to freeze offshore assets to prevent dissipation, and orders for transfer of assets.
Problems can arise when overseas jurisdictions do not recognise these UK Court orders, and there are challenges concerning enforcement. Since Brexit, orders made by the Family Court in England and Wales are no longer automatically recognised in EU jurisdictions; therefore, parties will need to seek advice early about jurisdiction and enforceability in a divorce process.
The information on this website is intended as a guide and does not constitute legal advice. Vardags do not accept liability for any errors in the information on this website, nor any losses stemming from reliance upon the statements made herein. All articles and pages aim to reflect the legal position at time they were published, and may have been rendered obsolete by subsequent developments in the law. Should you require specialist advice, tailored to your situation, please see how Vardags can help you.