How to ensure assets are not hidden in divorce proceedings
Divorce is never simple, and the more sophisticated the couple’s finances and the more valuable the assets, the messier the divorce proceedings can become. Where large estates or family trusts are involved, one spouse may try to hide or protect assets from the equal distribution required in a marriage in community of property. (Marriage out of community of property follows different rules and will depend on whether it is with or without accrual, so this article only deals with marriage in community of property). If one spouse suspects the other of hiding assets via a trust, they can ask the court to join the trust as a party to the divorce. This is called a trust joinder.
By bringing the trust into the case, the court can properly investigate whether the trust’s assets should be considered part of the spouse’s estate, especially in the case of an alter ego trust (a structure that exists purely to serve their personal interests).
How a trust joinder works
A trust can become part of divorce proceedings either at the start of the divorce or after the divorce proceedings are underway. The spouse can list the trust (and its trustees) as defendants from the beginning or make an application to join it later. If it is done later, the application should be made as soon as possible and definitely before the case comes to trial. This prevents unnecessary delays and ensures the trust has a fair chance to respond.
The legal steps involved
The process usually unfolds in two stages. First the lawyer raises the issue. They file a “special plea” to say that the case cannot be fairly decided without the trust being involved. This flags the fact that someone with a direct interest in the outcome (the trust) has not yet been joined. Thereafter a formal application is made to the court. This includes an affidavit setting out why the trust should be joined, for example:
- The trust is controlled by one spouse
- It is being used to hide or shield assets
- It operates as that spouse’s alter ego
- It holds assets that should be included in the divorce settlement
If the court agrees, it will grant an order and the trust will formally become part of the divorce proceedings.
High Court vs. regional court
Not every court can handle trust issues. While regional courts can deal with most aspects of divorce (such as maintenance, custody and division of property), they cannot rule on trust joinder applications. Only the High Court has jurisdiction to decide whether a trust should be joined and to deal with complex financial structures. Therefore, if a trust joinder is anticipated, the divorce should be started in the High Court. If the case is already in the regional court, it will need to be transferred to the High Court for the joinder application. Failing to do this early can cause costly delays.
Why trust joinder matters
A trust joinder ensures the court has the full financial picture of the couple during a divorce. Without it, one spouse may be able to unfairly shield wealth from their partner and unfairly keep assets that should be divided. However, the process is not always straightforward. For example, if the spouse requesting the joinder has been actively involved in running the trust, the court may view their application with caution.
Cape Town family lawyer can help
If you suspect your spouse is using a trust to shield assets, a trust joinder application may be necessary to secure a fair outcome in your divorce. SD Law is a firm of attorneys in Cape Town, Johannesburg and Durban with extensive experience helping clients arrive at a fair and equitable divorce agreement. If you are considering divorce and think your spouse is being less than honest with you about their finances, call family lawyer Simon Dippenaar on 086 099 5146 or email sdippenaar@sdlaw.co.za for a confidential discussion.
Further reading:
Simon Dippenaar
Founder & Managing Partner, SD Law
Attorney Simon Dippenaar has a BBusSc LLB degree and Professional Diploma in Legal Practice from the University of Cape Town, and is an admitted attorney of the High Court of South Africa. He is the founder and director of private legal practice, Simon Dippenaar & Associates, with offices in Cape Town and Gauteng representing South African and international clients.
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