Foreign Pension, holiday home? Nothing is excluded on divorce.
If you are getting divorced in England and Wales, you may be tempted to think that foreign assets – i.e. those held outside the jurisdiction – are excluded from consideration when it comes to sorting out finances. This is untrue.
On divorce, spouses and civil partners alike, have a duty to disclose all assets in which they hold a legal and beneficial interest – both in the UK and abroad. Everything then gets thrown (metaphorically speaking) into the matrimonial pot, ready for distribution.
Take foreign pensions, which have been very topical of late. Up until January 2017 it was an established practice that the courts of England and Wales are able to make a pension sharing order against foreign pensions as part of its legislative powers on divorce. A pension sharing order is where an existing pension is split and divided between the spouses in defined shares. However, following a recent ruling this all changed. It would now seem that the courts’ powers to make pension sharing orders only work in context to domestic pensions, not foreign pensions.
This does not mean that international pensions will be simply ignored; they just need to be dealt with in a slightly different way. The spouse with the foreign pension can provide a legal promise to obtain a similar order in the country in which they hold their pension, to split it with their spouse. Alternatively, the spouse with the foreign pension could be ordered to pay all or part of the income they receive from their foreign pension to the other spouse as maintenance.
If a spouse, say a husband, has both domestic and foreign pensions it may be that a pension share can be made against the domestic pension and/or any interest that the wife has in the foreign pension be offset against the husband’s interest in other assets held in England and Wales, most commonly property. This enables the husband to keep his foreign pension and gives the wife a greater share of the other domestic assets, such as the former family home.
In contrast to the current position relating to international pensions, the courts of England and Wales are able to make orders relating to the sale or transfer of foreign property. This is because these types of orders are said to be made against the individual (in personam) rather than against a thing (in rem).
In practice the court will only make an order unless there is evidence to suggest that a foreign court would disregard it.
If a financial order is not complied with it can be enforced. International enforcement is an extremely complex area of law, which is not covered in this blog.
Protecting Foreign Assets
If one spouse, again say a husband, owns assets in their sole name or in the name of a third party outside the jurisdiction and the wife can show that there is a) a real risk that the husband may transfer or dispose of these assets in order to frustrate any claims that she may have against them and b) that there are not sufficient assets in the United Kingdom in order to adequately compensate her for any loss she may otherwise suffer as a result of such assets being disposed of, the wife could apply to the court for a worldwide freezing order. This is a form of interim injunction restraining a party from transferring, disposing, or dealing with the foreign asset.
If a foreign asset has already been disposed of in order to defeat the other spouse’s financial claims and/or to prevent enforcement, an application can be made to the court to set aside the previous dealings.
The lessons on divorce when it comes to foreign assets
So, what does all this mean in practice? Disclose everything and consider the nature of any foreign assets and how they can be dealt with. If there is a real risk that foreign assets are going to be disposed of, consider making an application for a worldwide freezing order. If an international asset has already been disposed of consider making an application to have the disposal set aside. Whatever the circumstances, divorce or separation that involves foreign assets can be more complex than usual. Taking specialist legal advice early means the best possible chance of ensuring assets are dealt with fairly and as smoothly as possible.
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