There are many difficult issues that need to be tackled during a divorce, including child custody and child support, spousal support, and dividing debt and assets. For some reason, that last issue (dividing debt and assets), frequently brings out the worst in people. Unfortunately, some people employ illegal and underhanded tactics when it comes to the division of property – and one of those unsavory tactics is hiding assets. In a lot of cases, we see the man actually doing the hiding of the assets, when he is the one handling the family finances and the woman is uninvolved and/or uninformed about the status of the finances and assets.
Most people who hide assets know they shouldn’t be doing it, so why do they do it? Well, typically the motive stems from revenge due to infidelity, or some other egregious action by their spouse, as well as the desire to undervalue the size or value of their estate (assets and income), which usually comes down to greed.
Your next question may be “How do they do it”? Well, here are some typical methods that people use to hide assets during divorce:
- Temporarily transferring business assets to others (business partners, friends, or family members
- Using overseas and/or offshore bank accounts
- Converting cash into art, hobbies, or jewelry
- Paying off fake debt to friends and family
- Creating custodial IRA accounts in collusion with friends or family
Generally, these types of actions are illegal and not well tolerated by California family courts. In fact, if these types of activities are uncovered during a divorce, California family courts typically grant more than a 50% share to the unknowing spouse and may require that attorney fees (and possibly investigative fees) be paid by the perpetrating spouse in regards to resolving the issue of hidden assets/income.
So what should you do if you suspect your spouse is hiding assets during your divorce? Well, the very first thing you should do is make sure you have an experienced, reputable family law attorney. Family law attorneys who are experienced in uncovering and recovering hidden assets will have the knowledge and professional resources to investigate whether your spouse is withholding or hiding assets. Your attorney may recommend hiring forensic accountants, investment specialists, or other professionals who specialize in investigating business valuations, tax shelters, and other types of hidden assets and income.
Hidden assets are usually found from reviewing and investigating tax returns, public records (transfer of deeds, etc.), and bank documentation such as electronic transfers and withdrawals of large sums of cash. If you want to do some pre-legwork on your own, there are a few places you can look for hidden assets:
- Look at your joint checkbook ledger. Do you notice payments to friends or family members? This type of “debt repayment” is commonly used by people hiding assets. The checks may have been voided or “paid back” to your spouse after cashing them.
- Check over your bank statements for the past year. Do you notice any large or unusual types of transactions? Do your bank statements reconcile? This can be a lot of work but may give you an idea if there is really something to be worried about that needs investigated further.
- Review your children’s savings accounts and trust funds. Do the amounts look correct? Again, are there any unusual transactions?
- Review investment account statements. Again, you are looking for any unusual or suspicious activity in the accounts. Something that may stand out from the rest of the transactions.
Some people may have problems locating the above documents if they haven’t been intimately involved in the family finances. This brings us to a piece of advice which applies to ALL couples, whether newly married or long-time married; and that is that both spouses should be involved and have knowledge of their joint finances. Know about your marital assets, debt, income, and expenses. It’s also important to know where you keep your financial records, including copies of yearly income taxes.
If you are in the process of a divorce and suspect that your spouse may be hiding assets from you, please feel free to call us at 714.841.1931 and request a free consultation, or fill out the contact request on our webpage. The sooner you take action, the better chance you have of discovering and recovering hidden assets!
