- In Hong Kong divorces, property is generally divided on the principle of fairness. The court looks at factors such as how long the marriage lasted and each spouse’s financial needs and abilities.
- A transfer of assets made within three years before the divorce may be seen by the court as an attempt to avoid a fair division of property, and the court may ask for proof that it was justified.
- Divorce proceedings in Hong Kong require both sides to make full financial disclosure. Deliberately reducing your own assets so that your spouse receives less will be closely examined.
- Lawful ways to protect assets, such as a prenuptial or postnuptial agreement and a trust set up well in advance, can be a safer and more effective strategy.
Asset transfer before divorce means that spouses move joint or personal assets to a third party, or into one spouse’s name, before formal divorce proceedings begin.
An improper transfer may be seen as an attempt to avoid a lawful division of property. Below, we explain the risks of transferring assets in a divorce and the ways people try to protect property from being divided.
How Hong Kong divides assets in divorce: pre-marital property and the look-back period
In Hong Kong divorces, property is generally divided fairly. Unless there are special circumstances, spouses usually share equally all the joint property built up during the marriage.
When deciding how to divide property, the court considers several factors, for example:
- How long the marriage lasted
- Each spouse’s financial needs and abilities
- The standard of living during the marriage, and so on
In a Hong Kong divorce, dividing assets is often the most complicated part, especially when the look-back period for assets is involved.
The look-back period lets the court review the property a spouse acquired before and during the marriage, to decide whether it should count as marital property.
Significant property acquired before the marriage, such as a home, is usually not counted as marital property automatically. It may be counted if, during the marriage, it was used to improve the couple’s shared life or rose in value because of the marriage.
For example, pre-marital assets that were not used jointly in a short marriage may not be divided. A long marriage may change that, especially when the spouses’ financial needs have changed significantly.
Does pre-marital property count as marital property?
Feel free to check your situation with us.
How assets acquired after separation are valued and divided
Whether assets built up after the spouses separate, such as a work bonus or investment gains, count as marital property is a common point of dispute.
The court looks at where these assets came from, how they were built up and how directly they are linked to the marriage.
If the property was mainly gained through one spouse’s own efforts, it may not be treated as marital property.
Points to consider when transferring assets in a divorce
In Hong Kong, many people thinking about divorce wonder how to pass property to relatives or friends, so that less has to be shared with their former spouse.
Please note
- This kind of transfer carries legal risk. In particular, a transfer made within three years before the divorce may be seen by the court as an attempt to avoid a fair division of property, and the court may ask for proof that it was justified.
Dealing with pre-marital and post-marital assets
Generally, pre-marital assets may be left out of the division in a short marriage but counted as joint property in a long one. These include:
- Property owned before the marriage
- Estate
- Income earned after separation, and so on
The court assesses the division of property on a range of factors.
Company shares and asset transfers
When a couple own shares in a company, transferring those shares in a divorce involves more legal detail, such as stamp duty and the company’s own share-sale terms.
Please note
- In Hong Kong, stamp duty is still payable on a share transfer even when the divorce is the reason for it.
- Talk to the other shareholders before the divorce agreement is reached, so that the transfer goes smoothly and shareholding problems do not hold up the division of assets.
- Transferring assets is a complex process with many legal issues. Before making any transfer, consult a professional solicitor to make sure everything you do complies with the law.
How to protect your property in a divorce
In Hong Kong, property in a divorce is generally divided on a 50/50 basis, whether or not the assets are in joint names.
This starting point is meant to protect the financially weaker spouse, and assumes that both spouses contributed equally to the marriage.
Is the division of assets fair?
Before dividing assets, it is important to consider whether the marriage can reasonably be ended without putting unfair financial pressure on your spouse.
Please note
- In general, hiding assets to avoid division in a divorce is discouraged, because it may break the law and harm the divorce process.
Common ways of hiding assets, and their risks
Some people choose to hide wealth by passing assets to relatives or friends. Common transfers include:
- Property
- Shareholdings
- Cash in bank accounts
However, unless such a transfer was arranged well in advance and in a complex way, it is often found during the court’s financial investigation, and it then brings adverse legal consequences instead.
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Will an asset transfer be seen as avoiding division of property?
If in doubt, feel free to contact our dedicated consultants.
Why people transfer assets in a divorce, and when it is lawful
People may have legitimate reasons to transfer assets before or after a divorce, for example:
- Repaying a loan from a family member
- Giving a gift to a relative in need
In most cases, however, such transfers hide a wish to reduce what the other spouse can receive in the divorce.
The real-world consequences of reducing assets in a divorce
Deliberately reducing your own assets during a divorce so that your spouse receives less will be closely examined at the financial disclosure stage of the proceedings.
Divorce proceedings in Hong Kong require both sides to make full financial disclosure, including transparent reporting of all past financial records.
Financial disclosure
In court, an experienced family solicitor will examine and analyse each side’s financial disclosure in detail, to make sure no asset has been hidden or improperly transferred.
Please note
- If an investigation finds a transfer, the spouse who made it must prove that it was not intended to deprive the other spouse of their lawful financial rights.
Risks of transferring property before a divorce
Under Hong Kong law, if a spouse transfers assets within three years before applying for divorce, the court will presume that the purpose was to reduce the other spouse’s share of the property.
In that case, the person who made the transfer must prove to the court what the real intention was. Otherwise they may face legal consequences, including:
- The transaction being set aside
- Liability for legal costs
Handling asset issues in a divorce with care
Anyone thinking about transferring assets before or after a divorce should think carefully about the consequences.
To avoid sharing certain assets with your spouse in a divorce (such as pre-marital or inherited assets), protect them by lawful means, such as:
- Signing a prenuptial or postnuptial agreement
- Setting up a trust well in advance
This protects your financial security and also reduces legal disputes in the divorce.
Lawful ways to transfer assets in a divorce
Lawful ways to transfer assets include, but are not limited to, setting up a trust and signing a prenuptial agreement in good time.
Setting up a trust is a common and effective way to protect assets lawfully, especially for families who want to avoid property being divided in a divorce.
Moving pre-marital property into a trust can stop that property from being counted as marital property in a divorce.
Please note
- Such a trust should be set up before the marriage runs into trouble, so that it is not seen as a way of avoiding the division of property, which would affect its legality and validity.
- The court examines why a trust was set up. If its main purpose is found to be avoiding the division of property, it may declare the trust invalid.
Setting up a dynasty trust as an asset protection strategy
For wealthy families, a dynasty trust is an effective way to protect assets. It can keep wealth in the family from one generation to the next, rather than letting it pass to outsiders when a child divorces.
Please note
- This must rest on genuine wealth planning and be completed well before any trouble in the marriage, so that it is not seen as a way of avoiding the division of property.
Handle asset transfers in a divorce with care
Any attempt to transfer assets before or after a divorce should be considered carefully, to avoid legal risk.
Lawful ways to protect assets, such as a prenuptial or postnuptial agreement and a trust set up well in advance, can be a safer and more effective strategy.
When taking these steps to protect assets, consult a professional solicitor to make sure they comply with the law and really protect your property.
Protect your assets actively in a divorce
When assets are divided in a Hong Kong divorce, the key is to understand and use the rules on the look-back period for assets. We suggest:
- Keep detailed records of your property from the start of the marriage
- Before any asset transfer or protection step, get professional legal advice, so that you comply with the law and also protect your property rights
Prenuptial agreements and asset trusts are protective tools, but how far they hold depends on the court’s ruling in the particular case.
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- Divorcing overseas: can a Hong Kong person divorce in Hong Kong if they married abroad?
- Is separation required before divorce? How to prove separation and use the evidence
- Decree nisi and decree absolute in Hong Kong
- Hong Kong divorce agreements, petitions and joint applications explained
- Divorcing a missing spouse: the petition and other ways to serve documents
How can you protect your property lawfully?
Get in touch, and a dedicated consultant will first understand your situation.
FAQ: asset transfers before divorce in Hong Kong
Is it safe to transfer assets to my children before a divorce?
Transferring assets to children may still be seen as avoiding division, especially if the transfer happens shortly before the divorce.
Such a move may be open to challenge in law.
Can I sell my assets before a divorce?
You can sell assets, but if the sale is close to the divorce application, or there is evidence that it was meant to reduce the property to be divided, it may face legal scrutiny.
Is it safe to put assets into a trust before a divorce?
Putting assets into a trust is generally safer, but it must be done well before the divorce, and the trust’s purpose and structure must be lawful and reasonable.
Is it lawful to borrow from relatives or friends and move large sums of money before a divorce?
Borrowing from relatives or friends and moving the money may not be unlawful in itself. But if it is shown to have been done to avoid the division of property, it may be treated as unlawful.
Can I donate assets to charity before a divorce?
You can donate assets to charity, but if the donation is seen as a way to avoid dividing assets, the court may question it in the same way.
Does buying expensive items before a divorce count as an asset transfer?
Buying expensive items may be seen as a form of asset transfer, especially if the purchase is meant to reduce the cash available for division.
How do I prove that a pre-divorce asset transfer was lawful?
To prove a transfer was lawful, you need to give a transparent record of when, why and how it was made. You may also need testimony from a legal expert or documentary evidence to support that the reason was genuine.
