A recent ruling in a $100 million divorce case, held in Tel Aviv, shows that family courts have wider powers to unravel sham or concealed trusts during divorce, particularly if they suspect assets are being concealed, lawyers argue.
The wife in the case claimed that the entire family fortune, which she argued constituted marital property, was concealed within sophisticated financial structures, including trusts and foreign corporations. The HNW divorce dispute was replete with allegations and extensive documentation.
The implications of the court case are given in a commentary from Dr Alon Kaplan, attorney-at-law, and Orna Ronkin Noor, both members of the Israel Bar.
“This case is highly unusual in Israeli case law, particularly because the attorneys handling the case were required to confront the confidentiality barriers of trusts and entities established and operated outside the jurisdiction of Israel,” the lawyers wrote.
The burden of proof is to show that a trust is a sham starts with the claimant, but aggressive judicial scrutiny and adverse inferences can assist the wronged spouse, the lawyers argued.
The court ruled in favour of the wife (not identified by name in the note), awarding her $37.5 million and half of a house previously valued at $25 million. The ruling came after nine years of litigation.
The judge described the matter as a “property saga of unusual complexity” and issued strong criticism of the husband. The judgment stated that the wife “demonstrated that the husband wove a web of lies intended to deceive her, involving the concealment of wealth and assets through the use of trusts and corporate entities across the globe,” the note continued.
As a rule, the wife was expected to prove the scope of marital assets and support her claims with evidence. However, the court made an exceptional finding that reversed the burden of proof, requiring the husband to produce evidence supporting his claims. The verdict was due both to his conduct and concealment of information and the fact that he was found to have control over the assets, including the ability to influence the management of the trusts, it said.
Among the lessons of the case is that trust assets may enter the “matrimonial pot” if courts find true control and benefit remain with a spouse, or if the trust is an instrument for deception.
Non-disclosure can lead to reopened settlements, cost penalties and contempt of court, the lawyers concluded.
About the lawyers:
Dr Kaplan is an international expert in the fields of trusts, inheritance, and estate planning. He was admitted to the Israel Bar in 1970, to the New York Bar in 1990, and to the Frankfurt Bar in 1998, and brings with him five decades of experience advising high net worth individuals, families, law firms, and financial institutions on complex cross-border legal matters. He is the president of STEP Israel.
Alon Kaplan
Orna Ronkin Noor has been a member of the Israel Bar since 2000 and brings more than 25 years of experience in real estate, real estate trusts, trusts and inheritance and estate law. She is a member of the Wills, Inheritance and Estates Committee of the Israel Bar Association.
Neither lawyer acted for the persons in the case.
Orna Ronkin Noor