hiding assets during divorce concept

Most people know that the court divides marital assets in a divorce, but they often don’t consider what that actually means. Simply put, a court can only divide what is presented before it. If one spouse successfully hides assets from discovery during a divorce, the court cannot award the other spouse their fair share of those assets not discovered. However, hiding financial assets from actual discovery is much more difficult than it sounds. While some people believe they are being clever by trying to hide assets during the divorce process, this “strategy” can end up costing them much more money than it saves—especially if their spouse has employed an experienced family law attorney who thinks strategically and creatively.

In Maryland and Washington, D.C., marital property is divided by the court based upon the concept of equitable distribution. This means that property is to be distributed between divorcing spouses in a manner that the judge considers fair and equitable. In practice, and if the marriage is of a longer duration, the division is closer to equal, but not necessarily. Courts take a number of factors into consideration, including “any...factor that the court considers necessary or appropriate to consider in order to arrive at a fair and equitable monetary award.” That could certainly include misconduct by one spouse in wasting (dissipating) or concealing assets.

A spouse who hides assets during divorce does more than just reduce the amount of marital assets the other spouse receives. One of the factors courts consider in awarding alimony is how much marital property each spouse received in the divorce. If your spouse appears on paper to have received fewer assets than they really did because of efforts to waste or hide assets, the court may order them to pay less alimony than otherwise would occur (or may award them more in alimony if they are the payee).

Signs That Your Spouse is Keeping Assets Hidden

It may be difficult for you alone to tell that your spouse is hiding assets from you. Marriage is supposed to be a partnership, but in real life, partners often take on different responsibilities to run the business of marriage. For example, one spouse may do more of the housework while the other handles the finances. The division of labor can work well until a divorce is in the works. Then the spouse who isn’t as familiar with the finances—the “out-spouse”—may be at a financial disadvantage.

If you are the out-spouse, don’t berate yourself for not being more aware of the money matters in your marriage, but do take steps to educate yourself and gather information as soon as possible. Some signs that your spouse may be hiding assets during a divorce include:

  • Statements (bank, credit card, or investment) you used to see in the mail have stopped showing up
  • You suddenly can no longer get access to online financial accounts (presumably because your spouse has changed the password)
  • If you do have access to financial accounts, there are payments, especially large ones, that you do not recognize (however you should be conscious of normal, if infrequent, payments, such as for taxes)
  • You discover that your spouse has opened a PO box (to which they might be directing bills or financial statements to keep them from coming to the house)
  • Your spouse repays “loans” you weren’t aware of to family members or friends. In reality, they may be transferring money to people they trust, who will give it back to them after the divorce.
  • Your spouse has a history of heavy gambling (They may not be hiding marital assets intentionally, but instead they are wasting or dissipating them)
  • Your spouse has a recent history of infidelity (they may be spending money on a paramour)
  • Your spouse suddenly asks you to help with taking new loans, or borrows heavily against a home equity line or other joint credit source

Perhaps the most telling red flag of all is that something feels “off” or you are suspicious of your spouse’s financial activity, even if you can’t articulate why. Trust your feelings. Something may be going on even when you can’t articulate the exact reason for the feeling. But how do you find out for sure, and what do you do about it?

How to Locate Hidden Assets in a Divorce

If your spouse is hiding assets, it is much easier to obtain your fair share of those assets if they are located and the deception uncovered during the divorce, rather than afterward. A distribution of marital property in a judgment of absolute divorce generally is final, and having the matter reopened due to fraud is costly, inefficient and quite difficult.

When faced with this situation, your first move should be to tell your divorce attorney that you are concerned about your spouse hiding or dissipating assets. Beyond that, perhaps the simplest tactic is to gather as much information as you can, with as many details, about any and all financial dealings related to you, your spouse, and the marriage. Even if this only includes the name of a bank, credit card company, or investment broker, this information can be very helpful to your attorney. Of course, copies of statements, or account numbers, are even more helpful. If you have filed tax returns jointly, especially if using a Certified Public Accountant (CPA)or other tax professional to prepare them, your attorney will want to know that information as well.

Your attorney will conduct discovery during the course of your divorce specifically designed to uncover things like concealment or dissipation of assets. The discovery process involves the parties to a lawsuit (such as a divorce) requesting and exchanging various types of information and documents. Discovery includes:

  • Requests for production of documents
  • Interrogatories (written questions that a party answers in writing under oath)
  • Depositions (an oral examination of someone, including you or your spouse or financial institutions, where answers are given under oath and transcribed into writing by a court reporter)
  • Requests for admission (parties are asked to admit or deny the truth of an allegation; failure to answer on a timely basis constitutes an admission)
  • Subpoenas duces tecum (a third party, such as a representative of a bank, is compelled to appear at a certain place and time and produce documents or other evidence that would be relevant to a lawsuit)

Strategic use of discovery tools can put a spouse who is hiding assets in a bind: either they respond truthfully, and admit that they have concealed or wasted assets; or they make a false response, which constitutes lying under oath and could result in a judge awarding an “unequal” percentage of the marital property because that is the more “equitable” result. An experienced family law attorney will target questions so that it is difficult for the deceptive party to avoid answering.

Getting answers about assets and the related documents is only half the battle. Often, proof that a spouse was concealing assets isn’t immediately obvious from reviewing financial documents.

Depending upon your situation, your divorce attorney may suggest retaining a forensic accountant in your case. A forensic accountant uncovers fraud, embezzlement, and other misconduct by analyzing financial transactions as well as statements and related documents. A forensic accountant’s services do add to the cost of your divorce, but they are often well worth the expense, especially in a high-asset divorce. Your attorney can advise you about whether it makes sense in your situation to work with an expert such as a forensic accountant.

If you have concerns that your spouse is hiding assets in your divorce, the longer you wait to take action, the more difficult it may be to locate or recover those assets. We invite you to contact Strickler, Platnick & Hatfield to schedule a consultation.

Categories: Divorce