What Happens If Hidden Assets or Sham Trusts are Discovered During Divorce?

In the realm of divorce in South Africa, it’s not uncommon for complex assets like trusts to be involved. Trusts are frequently utilised for asset management and estate planning, but they can become a point of contention during divorce proceedings. Especially crucial is understanding the implications if the court finds hidden assets or rules that a trust is a sham or abused.

When a trust is deemed a sham during a divorce, the trust essentially loses its legal standing. The court will regard the so-called “trust assets” as belonging to the founder, who could face legal repercussions for hiding assets or misrepresenting their financial situation. This could affect the asset division and spousal support arrangements in the divorce settlement.

If a court acknowledges the legal validity of a trust but finds it has been abused, the “veil” of the trust may be pierced. In the context of a divorce, this means the assets within the trust could be considered as part of the marital estate for the purpose of asset division. This is especially important when hidden assets are suspected to reside within the trust. Given the complexities of trust law and hidden assets during a divorce in South Africa, legal expertise is invaluable.