In New York, under a new court rule and a parallel state law, a couple’s assets are automatically frozen upon the filing or receipt of a summons in a matrimonial action. This new regime necessitates advance asset protection planning if divorce is contemplated.
In the past, if one spouse wanted to protect assets from what he or she perceived as an impending divorce action, he or she could do so, such as by transferring assets to an offshore asset protection trust, provided he or she had not already received a Temporary Restraining Order (TRO) from a court. Now, under the new law, the other spouse need not serve a TRO; the other spouse need only file an action for divorce and marital assets are automatically frozen without a TRO. The new rule prohibiting asset transfers is binding on a plaintiff immediately when the summons is filed, and on a defendant upon receipt of service of the summons.
Thus, persons facing the threat of divorce and the threat of a spouse depleting, sequestering or making a claim for assets, must plan ahead. Whereas in the past, asset protection would be rendered impossible once a court issued a TRO, now the mere commencement of a divorce action will serve to freeze all vulnerable assets and render asset protection effectively impossible and unlawful. The bottom line: Don’t wait for a divorce; if the marriage is shaky, protect your assets well in advance.