During divorce, all assets and debts should be shared fairly. However, in divorce, it isn’t uncommon for one or both spouses to try to hide assets, especially if it is a high net worth divorce. Hidden or unrevealed assets are often alleged by the spouse who is the least earner or not the main earner.
This can often lead to a more difficult process of division of property. And can often lead to financial stress to the spouse who may be unaware of what financial resources they might be entitled to. If discovered, the court can punish the guilty partner.
If a divorce has been hidden and planned by just one spouse, they may have stashed away assets or income for themselves before filing for the divorce. Uncovering hidden assets can be a difficult, time-consuming, and expensive process.
Hiding assets is being dishonest and is illegal. While it’s not commonplace in all divorces, it does happen. Fortunately, there are ways to know whether a spouse is hiding assets.
How Do Spouses Hide Assets?
If you suspect your spouse for hiding assets, it might be a relief to know that ex-spouses hide assets in not so many ways.
As you and your divorce team search for the family’s financial records, follow where the money is and note anything that could indicate the existence of hidden assets using these four methods.
- Transfer the asset to a third party
There is nothing wrong with buying artwork, antiques or any other form of possession. However, your spouse may buy things that don’t interest you, keep them or transfer them to other people. These items may be sold off once the divorce is finalized.
- Create a false debt
Your partner can loan out money to family members, friends, or business associates in the months leading to filing for divorce. Once the divorce is finalized, they may go back and recollect the money and keep it for themselves. If part of this money was marital, at least a portion of it also belongs to you. It is therefore important to scrutinize loans as much as you can.
- Deny the existence of the asset
- Claim that the asset was lost
Proving that any of the four scenarios has happened can be challenging. However, a detailed paper trail can unearth any cover-up by your spouse. If your spouse has diligently taken enough precaution in covering their tracks, you may find it difficult to locate any documentation.
Common Hiding Places
Your spouse is likely to hide assets in:
- Delayed raises, contracts, or bonuses
- In digital currencies
- Custodial funds. Your spouse may invest in custodial funds such as your kids’ education fund 401(K) or retirement funds.
- In businesses. Paying non-existent employees or skimming cash
- Overpaying the IRS and ticking off the 1040 box
- Purchase of undervalued items
- Real estate devaluation or allowing units to go vacant during divorce
- Payments for expenses of a new interest
My Spouse Owns a Business, Can They Hide Assets More Easily?
A business proprietor has many ways of hiding assets and therefore you should be very cautious. Note that you may encounter issues of valuation and not issues of disclosure. You may need a remarkably experienced accountant to help you in valuation as it tends to be a costly process.
How Do I Find Hidden Assets During My Divorce?
This process is highly involving and sometimes needs professionals to handle such cases. Your divorce attorney might be a key player in this process but a forensic accountant s needed to examine any missing records and unearth discrepancies.
Your investigations should include these:
- Collecting tax return copies
- Children’s bank account information
- All your spouse’s debts
- Savings accounts
- Lifestyle analysis
- Insurance statements
- Checking canceled checks and account statements
- Offshore accounts
- Loan applications
- Money market funds
- Cash flow procedures for any business
- Changes to a spouse’s employment, salary, bonuses, etc.
- Safety deposit boxes
- Property and possessions
This information can help out your investigative team to piece together your spouse’s lifestyle, financial activities and any unreported assets or debts. While you may not uncover everything hidden, you will have successfully shown the court that your ex-spouse is dishonest and request punishment. The courts may also award you a larger portion of assets if such dishonesty is discovered.
Can I Hide Assets Legally?
Hiding assets from your ex-spouse is not legal as the law requires full and complete disclosure of every marital property. In a divorce, you are expected to share full disclosure of assets under penalty of prevarication. If non-revealed assets are discovered, the court may assign more benefits to the aggrieved party and the person hiding the assets could be found in contempt of court.
Some people try to protect or hide their assets from creditors, divorce, and lawsuits in domestic or offshore asset protection trusts. While a spouse can successfully hide assets in an offshore trust, if done close to the divorce, definitely the judge will have a keen interest in the transfers. However, if a spouse did the transfers way early, the assets may go unnoticed.
Are There Penalties for Hiding Assets?
If hidden assets are discovered, the guilty party can face serious penalties. These penalties could be in the form of fines, dismissal of the claim, attorney’s fees, or have criminal charges brought against them. If these assets are discovered after the divorce is finalized, the offended party can request to re-litigate the case and ask for restitution payments.
If you doubt whether your spouse will disclose all financial records voluntarily during your divorce, it is best to use your attorney to go the legal way to get information. This process is often called the “discovery process.”
The discovery process involves several steps and can vary from state to state. However, it generally involves demands for documents, requests for responses to queries, demands to inspect, and testimonies given under oath.
How Can I Ensure Fairness in My Divorce Settlement?
You need to stay informed and as involved as you can. During your time, search for anything that looks unusual and understand how your family finances have been for the past year. You also need a knowledgeable divorce lawyer and forensic accountant who will help you uncover hidden assets.