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What happens with overseas assets during property settlement?

We live in an age where the kilometers, miles and oceans that divide continents are bridged by the internet, email, Skype all forms of social media, the list goes on.  Nothing is too foreign or too far to be within reach of an ordinary person, the up and coming entrepreneur or the CEO of a multi-million-dollar corporation. It is becoming all too common for individuals and entities to own foreign assets or trade outside their native land. As a family lawyer, I have dealt with property settlement matters where clients or their former spouses have assets in Malaysia, Columbia and South Africa and the list goes on for my colleagues.

Property Settlement Overseas AssetsFor those who own assets outside of Australia or those who may have an interest in an overseas asset because of a marriage or de facto relationship the myriad of questions when seeking legal advice center around these two questions - What happens to overseas assets during separation and/or divorce? How are these assets dealt with in Australia if at all? Pretty simple questions really but not so simple are the answers. There are several contingencies that must be taken into consideration when giving advice about overseas assets in the context of a property settlement. These include but are certainly not limited to:

  • The location and nature of the asset, liability or financial resource;
  • The ownership or structure around the asset, liability or financial resource;
  • The acquisition and preservation of the asset, liability or financial resource before and during the relationship and after separation;
  • Whether the Australian courts have jurisdiction to deal with that asset, liability or financial resource?
  • Whether the foreign country where the item is located has jurisdiction to deal with that asset, liability or financial resource?
  • Is it in your best interests to pursue a property settlement in Australia or in the foreign country where the asset, liability or financial resource is located?
  • If you reach a settlement in Australia or in the foreign country will it be enforceable in this jurisdiction or in the foreign jurisdiction?

First and foremost, the Family Law Act 1975 and Family Law Rules 2004, require persons who are subject to a property settlement to make full and frank disclosure of all assets, liabilities and financial resources wherever situate. That is to make the other person aware of all assets in your sole name or in joint names and the value of those assets. Irrespective of where an asset is located both persons must disclose to the other any item in which they have a financial interest. There are serious consequences for failing to disclose the required information.

Albeit a complex area of family law, there are plenty of precedent cases which have set the foundation for the Family Court to deal with overseas assets. Generally, Australian courts have powers to make property settlement Orders that deal with assets that are located overseas. However, in 2013, the Full Court of the Family Court of Australia delivered a decision whereby any persons seeking a property settlement in the Australian Court with overseas property/assets, should obtain a property settlement agreement in the country where the property/asset is situated.

This is an interesting concept and one I have personally dealt with on behalf of a client with property in a foreign country. For the purpose of confidentiality, let’s call that country X and the parties we will refer to as A and B.

A and B where married in country X and ultimately divorced in country X however, they had moved to Australia in the later years of their relationship and purchased property and established superannuation interests, although the majority of their wealth was in country X. In this matter, the parties settled their property settlement affairs in country X but had agreed to seek an enforceable agreement in Australia in the same terms as the agreement reached in country X. The reason being was to ensure that they had a legally enforceable agreement in both jurisdictions to make certain that both A and B complied with the terms of the agreement.

Based on this and previous experiences, it is wise to seek an enforceable agreement in any jurisdiction where there are property/assets. The reason being is that agreements made in one country may not necessarily be recognized or enforceable in the other country in addition to ensuring that both persons comply with the terms of any agreement irrespective of where they are located. It is also wise to seek legal advice from a lawyer with expertise in both jurisdictions as the laws of one country regarding separation and property settlement may differ from Australian laws.

A common misconception is that by moving assets overseas, you can avoid the reach of the Australian Courts when it comes to property settlement. There are numerous cases where a person has been ordered by an Australian Court to return assets which they have transferred overseas back to Australia. For example, in 2018 a Husband in property settlement proceedings commenced in Australia was ordered to return funds which he had transferred overseas over a period of time.

In this case and again for confidentiality, I will refer to the parties as A and B and the country as X, A and B have been married since 1999 and had two children together. They moved to Australia in 2013 and separated shortly after in 2017. A and B held assets in X and had accumulated assets in the short time they were living together in Australia. A had withdrawn significant funds from both X and Australia and transferred these monies to accounts in A’s name only in another country. The Court determined that in withdrawing funds from X and Australia, A purposefully denied B’s access to those funds and the right to a just and equitable property settlement and ordered A to return the funds to Australia to allow for a fair property settlement.

If you have concerns about assets being moved overseas or are contemplating doing so, it is fundamental that you seek legal advice without delay. The longer issues like this are left the more difficult it is to repair any damage that may have been caused as a result. Like with any family law matter it is always prudent to reach out to a lawyer who specializes in family law. At Forge Legal, we are proud to have dealt with even the most complex of family law matters in particular, property settlement with overseas assets, complex family and business structures and significant asset pools. We offer strategic advice tailored to your individual needs and help you determine your next best steps to resolving your matter.