Why Some Spouses Use Trusts to Hide Assets During Divorce?

Some spouses use trusts to hide assets during divorce because property validly transferred to a trust is ordinarily separate from the spouse’s personal estate, making their apparent wealth smaller. A South African trust is not a separate legal person, however: trustees hold or administer its property in a distinct trust estate, and a court may disregard the ordinary consequences of the trust where the form was abused to defeat an accrual or other patrimonial obligation.

Why a Trust Looks Like an Effective Hiding Place

Section 12 of the Trust Property Control Act 57 of 1988 separates trust property from a trustee’s personal estate, except where the trustee is also a beneficiary entitled to that property. A founder does not continue to own an asset merely because they created the trust.

Assets may be registered as trust property or held in trust accounts, while trustees transact for the trust. Where a family business already uses the structure, the other spouse may never have seen its records. That information gap—not legal immunity—makes a trust appear useful for concealment.

The “Why” — Motive and Opportunity

The motive is usually to reduce the value apparently available for an accrual claim, division of a joint estate, a qualifying redistribution claim under section 7(3) of the Divorce Act 70 of 1979, or maintenance. The opportunity is greatest where one spouse controls the records, trustee appointments, business cash flow and distributions while the other has no role in the trust.

A long-standing family arrangement can be legitimate, but its transactions still require scrutiny. Burger Huyser Attorneys fields both Divorce Law and Trusts matters, allowing the matrimonial claim and trust administration to be considered together.

The Statutory Counterweights in South African Law

Provision	What it does
MPA section 7	When accrual must be determined, a spouse must furnish full particulars of their estate’s value within a reasonable time after request.
MPA section 8	A court may order immediate division where a spouse’s accrual right is being, or will probably be, seriously prejudiced.
MPA sections 15 and 16	For a joint estate, section 15 controls specified transactions and donations; section 16 permits suspension of a spouse’s powers where essential for protection.
MPA section 20	A court may order immediate division where a spouse’s interest in a joint estate is being, or will probably be, seriously prejudiced.
Trust Property Control Act sections 9–12, 16–17	Trustees must act with care, identify trust money and property, account to the Master when requested and preserve records.

Section 8 of the Divorce Act concerns variation of certain maintenance and child-related orders; it does not authorise setting aside trust transfers. Trust-abuse relief rests on the applicable matrimonial-property provisions, properly pleaded common-law relief and evidence.

How Courts Pierce the Trust in Practice

Courts distinguish a sham trust, which never operated as represented, from a valid trust whose ordinary consequences are disregarded for a particular purpose because its form was abused. In PAF v SCF, the Supreme Court of Appeal confirmed that a transferred value may be counted for accrual where the trust form was used dishonestly or unconscionably to evade a liability.

The factual enquiry commonly tests:

• Control: who appoints trustees, directs decisions and benefits in practice;
• Source: whether value moved from a spouse or joint estate and what the estate received in return;
• Timing and motive: whether creation, restructuring or funding coincided with separation or calculation of the claim;
• Administration: whether records show genuine trustee decisions or the founder treating trust property as their own; and
• Governance: what the deed permits and whether actual conduct matches it.

Badenhorst v Badenhorst established the influential test of de facto control and proof that, but for the trust, the spouse would have acquired the assets personally. PAF v SCF confirms that lack of control is not decisive where the wider facts prove abuse.

The Discovery Layer — How a Suspicious Spouse Actually Proves It

Discovery in a defended High Court divorce is governed principally by Uniform Rule 35—not Rule 43. After pleadings close, Rule 35(1) allows one party to require the other to disclose on oath relevant documents in their possession or control. Rule 35(3) covers additional documents, Rule 35(6) inspection and Rule 35(7) an application to compel compliance.

1. Plead the trust issue so that deeds, bank statements, loan accounts, resolutions, financial statements, distributions and correspondence are relevant.
2. Use Rule 35 for records in the spouse’s possession or control, including electronic records.
3. Use the appropriate process for non-parties. Rule 38 permits a subpoena requiring a witness to lodge a specified trial document, subject to privilege.
4. Use a forensic accountant where tracing or business valuation is required; expert analysis does not replace formal proof.

Rule 43 is limited to interim maintenance, a contribution towards matrimonial-action costs, and interim child care or contact. A costs contribution may fund an investigation, but Rule 43 is not discovery. Interrogatories are not a substitute: Rule 38(5) concerns them only where a court directs evidence on commission.

Red Flags That Suggest a Trust Is Being Used to Conceal

• The trust is created, revived, funded or restructured shortly before separation or trial.
• One spouse effectively controls trustees and distributions.
• The trust pays personal expenses without properly recorded decisions or distributions.
• Business value moves to the trust while the spouse’s estate contracts.
• The other spouse is denied deeds, accounts or resolutions.
• A dormant trust becomes active as the divorce or accrual calculation approaches.

The Trust Done Properly Is Not Itself the Problem

A genuine estate-planning, business-succession or vulnerable-beneficiary trust is not automatically part of either spouse’s estate. A trust funded for a proper purpose and administered by trustees exercising independent judgment will ordinarily retain its separate estate. Courts test substance and evidence; neither the label “family trust” nor a founder’s influence alone proves concealment.

What a Spouse Who Suspects Concealment Should Do

• Preserve documents lawfully available, including deeds, statements, resolutions, e-mails, messages, minutes and letters of wishes; never access protected accounts unlawfully.
• Prepare a chronology of transfers, trust changes, separation and disclosures.
• Obtain advice before approaching a bank, adviser or trustee, as informal contact may alert parties or bypass the correct court process.
• Address pleadings, urgent protection and discovery early. Joinder, subpoenas, valuations and forensic accounting may be required, so no standard completion time can be promised.

Burger Huyser Attorneys’ Family Law department is headed by Anna-Mi Nel, and its Divorce Law and Trusts practices can review both sides of the transactions.

If you are divorcing in Gauteng and suspect that a trust has been used to reduce the estate disclosed, Burger Huyser Attorneys can advise on section 7 disclosure, Rule 35 discovery and the remedy supported by the facts. Contact Linden on 011 888 0246, Centurion on 012 644 4990, Bedfordview on 011 201 7190, Sandton on 011 253 3080, Roodepoort on 011 668 0030, Alberton on 011 439 3990, Pretoria/Menlyn on 012 471 5700, or Midrand on 010 022 4082.

Frequently Asked Questions

Can a spouse really hide assets in a trust during a South African divorce?

A spouse can make assets harder to identify by transferring value to a trust, but a valid transfer does not make trust property untouchable. The court may examine the funding, timing, control and administration and may disregard the trust form for a particular claim where dishonest or unconscionable abuse is proved. Formal discovery can also compel relevant records held or controlled by a party.

What is section 42 of the Matrimonial Property Act?

There is no section 42 in the Matrimonial Property Act 88 of 1984; the Act ends at section 38. Section 7 is the relevant accrual-disclosure provision and requires a spouse, within a reasonable time after request, to furnish full particulars of the value of their estate when the accrual must be determined.

Can a court “pierce the veil” of a trust in a divorce?

Yes, but not merely because one spouse founded or influenced the trust. A court may pierce the trust veneer for a particular purpose where the evidence proves that the trust form was used dishonestly or unconscionably to evade a liability or avoid an obligation. The remedy and amount depend on the matrimonial regime, pleadings and facts.

How long does a contested divorce with trust-asset disputes take in South Africa?

There is no reliable standard duration. Timing depends on the court roll, scope of discovery, whether trustees or other parties must be joined, disputes over privilege, the location of records, expert tracing or valuation, and whether the matter settles. An attorney can estimate stages only after reviewing the trust structure and available evidence.

Does the non-founding spouse have a right to see the trust deed and financials?

Not automatically merely because they are married to the founder. In defended litigation, relevant trust records in the other spouse’s possession or control may be obtained through Rule 35, while specified records held by non-parties may require a subpoena, joinder or another court-directed process. Access depends on relevance, possession or control, privilege and the relief pleaded.