During divorce proceedings, one of the main steps to take is the division of financial assets. This is most often achieved through a financial settlement. Although, there can be complications that lead to financial disputes that need to be settled in court.
And one of those complications can be a third party announcing a claim on financial assets that are being discussed for distribution.
For instance, your ex-spouse owns a business and there are other co-owners involved. You claim it’s a matrimonial asset (asset acquired during marriage), but a third party appears to claim otherwise. These types of situations can add additional stress and inconvenience to an already unpleasant process of divorce.
So, what do you need to know about third-party involvement in a divorce?
When can a claim be made by a third party?
Third parties tend to get involved in the division of assets to defend their own interests around the assets in question and seek to join the financial proceedings between spouses. Or alternatively, they can be asked to join the financial proceedings by one of the spouses – to argue against the opposite party’s claim on the asset.
The third party is allowed to join the proceedings if their personal interests need to be protected or challenged and the court agrees. Additionally, it’s important to get the third party involved as early in the proceedings as possible. This will help the court determine the validity of the claim and delegate the required resources.
In its essence, there are two key scenarios, where the court allows a third party to join the financial proceedings:
- The third party is asked to join the ongoing divorce proceedings by one of the spouses. In cases where the opposite party is set to benefit from an asset in that third party’s name. So, the invitee can challenge the legitimacy of the opposition claim.
- The third-party claims a share of matrimonial assets that are being disputed and seeks to be involved in the financial proceedings. With the goal of defending their own interests. The claim can be supported by one of the spouses, but it’s not necessary.
Examples of third-party claims
There are two main sets of circumstances, where the third party can get involved in financial proceedings. They can be ‘asked to join’ or ‘seek to join’ themselves.
For example, if a third party was ‘asked to join’ the financial proceedings:
- The wife claims that the husband’s parents hold shares in a family business. But the business is held in trust for the husband. This means that the husband is directly benefiting from it. And the wife may want to involve the husband’s parents in the financial proceedings to challenge the rightful shareholders of the company. Considering that the husband is benefited by the trust – the wife can argue it’s part of matrimonial assets and thus needs to be considered in the financial settlement.
For example, if a third party ‘seeks to join’ the financial proceedings:
- The wife’s parents invested in her business during the marriage, which allowed her to start and grow the business. The money from the business was used to support the family and now the husband is claiming it as a matrimonial asset. The wife’s parents can wish to get involved in the proceedings to protect their investment and ask to be compensated for their share.
How does the court determine that the third-party claim is valid?
To determine whether the third party can join the proceedings, the court considers one of the two factors:
- If it’s desirable to include an additional party in the proceedings, so the dispute can be resolved
- If there is an ongoing issue between an existing party, that is connected to the dispute in the divorce proceedings, and the new party. It’s only desirable to add the new party if it helps resolve that dispute.
The key thing that the court needs to determine is whether the third party is ‘desirable’ to help solve the raised issue.
Although, the court also must consider if the increased legal costs & court time are proportionate to what the third party is there for. For instance, if the disputed asset won’t be sold or transferred, the third party may not be required to participate. Since their interests won’t be affected.
How are the divorce proceedings affected by third-party involvement?
Firstly, if a third party asks or seeks to join the financial proceedings – they need to be represented separately.
Before the third party can officially participate, there usually will be a preliminary hearing. Which determines whether the new party can join the proceedings. The court will take the third party’s claimed interest, the extent of it, and legal costs in mind whilst making their decision.
Additionally, the third-party claim needs to be settled before a final financial outcome has been determined between the divorcees in most cases. This can lead to a delay in the overall proceedings. The court may also hold a hearing where the third party will need to provide evidence about their claim – before any core proceedings even start.
Considering that the third party’s involvement will result in higher legal costs for all parties involved – it must be a careful decision. Although, if the third-party claim fails to be settled – one of the divorcee’s final financial awards can be significantly affected.
So, if you’re trying to get a third party involved in your divorce, you need to carefully review whether the increase in cost and risk is worth what the third party can bring to your claim.
Is there a way to limit third-party involvement in the divorce?
If you’re aware that there are third parties that have a claim on disputed financial assets in a divorce – there are some steps, you can take beforehand to limit their involvement.
- Make sure to record any and all friends, relatives, or business partners in a declaration of trust or loan agreement.
- You can officially register a restriction at the Land Registry. This will notify the invested party before the asset is sold.
- Keep a detailed record with evidence of any financial contributions/support made in the span of the marriage.
Taking these steps beforehand may help you limit third-party involvement in the divorce. Not only will this give clarity to the court & all parties involved, but it will also make the proceedings move quicker.
The third party’s involvement in divorce proceedings always adds another layer to an already complicated process. Not only will it increase the legal costs, but it’s also very likely to take more time to settle.
It’s especially important to be strategic and careful if you’re the one who is involving a third party. Since it can affect your finances negatively.
So, if you’re in a situation like this, acquiring legal advice might be your best option in navigating the tricky legal landscape.