Many divorced spouses worry that their spouse may sell assets during a divorce and leave little or nothing to share. This can be especially problematic if one spouse was financially controlling or secretive, or handled all the finances during the marriage, with the other having limited insight into the full financial picture. One could sell assets the other doesn’t even know exists. Or, one spouse may transfer money or property to a family member to try to prevent the other spouse from accessing it, anticipating that the family member will transfer it back once the divorce is final.
But will the Court really allow one spouse to cause financial harm to the other by authorizing the sale or transfer of assets in this way? Probably not, due to additional probate and Family Court Rule 411. This is sometimes referred to as an “automatic restraining order” or “rule 411”.
This article explains how Rule 411 works and what Rule 411 does (and doesn’t do) to protect marital assets for equitable division during divorce proceedings.
Rule 411 comes into effect when a complaint is filed or served
Once the spouse filing for the divorce (the plaintiff) has filed for divorce, they are prohibited from selling assets (among other restrictions). Rule 411 comes into effect for the defendant spouse once they receive the petition for divorce. A copy of Rule 411 is issued by the court with the subpoena and must be served with the divorce complaint so the defendant knows they are prohibited from selling assets once served with a police officer. the divorce complaint and the issued summons. by the court, or once they have signed the summons before a notary.
Rule 411 prohibits more than just the sale of assets
Both parties are also prohibited from transferring, encumbering, concealing, assigning, withdrawing or “disposing in any way”.[ing] of assets. For practical reasons, this means that divorced spouses cannot take other steps to dispose of their assets, such as: giving assets to a family member, obtaining loans for which assets are pledged , such as a mortgage or car loan, or assigning an interest in property to a third party.
Rule 411 applies to real and personal property
Real estate includes every property in which you have an interest: your home, vacation home, rental property and timeshare. Personal property can be tangible (like a car) and intangible (like a bank account).
Basically, “personal property” means any type of property you may own that is not real estate: your bank, retirement and investment accounts, your stock options, your deferred compensation, the promissory notes you hold, your business interests, your life insurance. policies, your pension, your car, your boat, your snowblower, your RV, your jewelry, your artwork, your tools, your antiques, your furniture, your livestock, your stamp collection, your pets and any other property you own.
For convenience, Rule 411 applies to everything you own.
There are exceptions to rule 411
Since Rule 411 means you can’t sell, transfer, or otherwise dispose of any assets you own, you may be wondering how you and your family are going to pay your expenses during the divorce proceedings. It is important to note that there are exceptions, including an exception allowing the use of assets to pay for reasonable living expenses.
- You may sell/transfer/encumber assets as needed for reasonable living expenses. This means that if you need to borrow from your 401(k) to make your mortgage payments, you can. You can also sell assets and use the proceeds to pay other reasonable living expenses. However, “reasonable” is a subjective term. So if you sell assets to pay for living expenses and your spouse decides to argue that your expenses were “unreasonable,” the judge will have to decide what “reasonable” and “unreasonable” mean in the context of living expenses. typical during your marriage. .
If you’re selling or borrowing assets in order to maintain the status quo of the amounts and types of expenses that were paid before you or your spouse filed for divorce, you probably aren’t violating Rule 411.
- You may sell/transfer/encumber assets in the ordinary and customary course of business. Rule 411 permits the sale, transfer and encumbrance of assets in the ordinary and customary course of business. So if your business is buying houses, fixing them up, and selling them for a profit, it’s probably good that you continue those business activities after filing for divorce. You should consider consulting an experienced divorce attorney to ensure that your business activities are likely to meet this exception.
- You may sell/transfer/encumber assets in the ordinary and customary course of investing. If you have a stock account and you actively buy, sell, and trade stocks to make money, you can probably continue to do so after filing for divorce.
- You may sell/transfer/encumber assets for payment of reasonable attorneys’ fees and expenses in connection with the divorce action. Rule 411 recognizes that you will need to be able to pay your attorneys to continue to be represented by an attorney during your divorce, and that you may not be able to pay them out of your earnings alone. You are allowed to sell, transfer or encumber assets to pay for your divorce legal costs.
- You can sell/transfer/encumber property if your spouse consents in writing. If your spouse agrees to the sale or transfer of property in writing, Rule 411 allows you to proceed with the sale or transfer. The writing should probably be signed by you and your spouse, and ideally incorporated into a court order. You should consider consulting an experienced divorce attorney to ensure that any sale or transfer of property with your spouse’s consent is properly documented to ensure this exception will be met.
- You can sell/transfer/encumber assets by court order. Probate and Family Court still has the authority to authorize the sale or transfer of property that would otherwise violate Rule 411. For example, if your car is sold out and you need to buy a new one, but your spouse will not agree, you can always ask the court to make an order allowing you to do so. You should consult your divorce attorney to determine the best course of action.
Rule 411 prohibits more than the sale, transfer and encumbrance of assets
Until you are divorced by the court, even if you are separated, your spouse is still your spouse, and Rule 411 prohibits other actions that could harm a spouse while the divorce is pending.
- You cannot incur debts that affect your spouse’s credit. After you or your spouse files for divorce, you are prohibited from incurring debts that affect the other spouse’s credit. This would include further borrowing from a line of credit secured by your marital home, or the unreasonable use of credit cards or credit or bank card cash advances.
- You cannot change the beneficiaries of life insurance policies and retirement accounts. Unless your spouse consents in writing or the court orders otherwise, you must maintain the status quo. This includes removing your spouse as beneficiary and putting your children as beneficiaries instead. Likewise, you cannot change the beneficiaries of your pension and retirement plans and accounts.
- You cannot remove your spouse or minor children from the coverage of insurance policies. After you or your spouse files for divorce, you cannot remove your spouse or children under the age of eighteen from insurance coverage. This includes medical, dental, life, automobile and disability insurance. You are also required to maintain all existing insurance coverage in force and in full effect, which means that you must continue to pay all policy premiums.
Rule 411 is no longer in effect once you are divorced
Once a divorce decree is issued by the court, Rule 411 is no longer in effect and you can sell, transfer, conceal, assign, withdraw or dispose of your property as you wish.
But what if we are separated and plan to file a joint divorce petition?
Sometimes the spouses decide to file a joint petition for divorce, working together to resolve all issues related to the divorce, sign a written separation agreement and file it jointly, requesting that it be incorporated into a divorce decree. Since neither spouse files a complaint, Rule 411 never applies and neither of you is prohibited from selling or transferring assets.
If you have retained the services of a lawyer or mediator and are considering a divorce, but suspect that your spouse is selling assets, you should consider filing a divorce complaint immediately to benefit from the protection of the rule 411.
If you’re considering divorce, you should probably refrain from selling assets, even if neither of you has filed for divorce
Even though Rule 411 doesn’t technically apply if you’re negotiating a divorce or trying to settle the divorce without court intervention, you should probably act as if it does if mediation fails and the one of the spouses decides to involve the court. Judges generally don’t look favorably on selling or gifting assets or removing your spouse from employer-provided life insurance when you are clearly considering divorce.
If you are concerned that your spouse is selling or hiding assets, or otherwise preventing assets from being included in your marital assets to be divided upon divorce, you should consult a divorce attorney. Although Rule 411 is there to protect divorcing spouses, an experienced attorney can ensure that you are able to take full advantage of this protection.