Can you give property away to remove it from a family law settlement?
When you are going through a family law property settlement emotions are running high. You may be aggrieved by the separation. You may begin to entertain the idea that if you disposed of, or transferred or gifted certain property to a friend or a family member then you would no longer own that property and it wouldn’t form part of your property settlement.
The Family Law Act provides a mechanism to “undo” any transactions that the Court considers a ‘sham’ and transactions that aim to defeat the interests of a spouse.
Section 106B ‘Transactions to Defeat Claims’ is the key provision under the Family Law Act 1975 (Cth) when it comes to undoing actions taken to reduce the assets or dispose of property.
The section provides:
Section 106B(1) – in proceedings under this Act, the Court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by a direction in the interest of, a party, which is made or proposed to be made, to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat such an order.
The word ‘disposition’ includes: a sale, gift, the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.
Court proceedings must have been started to apply to set aside or restrain the making of a ‘disposition’. An application for an order under section 106B(1) is not limited to the “wife” or “husband”. A creditor to a party to the proceedings (if the creditor would not be able to recover his or her debt if the instrument or disposition were made), or any other person whose interests would be affected by the making of the instrument or disposition may also seek to set aside the ‘disposition’.
You need to be tactical in Family Law proceedings. There is no advantage to transferring property to a third person to avoid proceedings.