Divorce and Hidden Assets

Divorce and Hidden Assets

Divorce and hidden assets go hand in hand more often than you think. Divorce is an emotionally charged and stressful time.

 

When the life you have built with your soon to be spouse is no more and your financial future is at stake, it is important to ensure that your and your spouse’s assets are divided properly.

Unfortunately, when most likely there are already trust issues, many people take advantage of their spouse during this uncertain time.

 

Hiding assets during divorce, though unethical and illegal, happens more frequently than most people expect. And most frequently, it happens to women.

Protect Yourself … Be Proactive

If you are a woman going through divorce, your best defense is to be proactive in protecting assets. The first step is to make sure you are working with a divorce team -- your own attorney and a Certified Divorce Financial Analyst® , both of whom will have your best interests in mind. With this team, you are assured of professional expertise and support so you have the opportunity to receive a fair settlement.

One of the things that your Certified Divorce Financial Analyst® will do as part of the divorce process is to conduct a lifestyle analysis. This establishes a clear picture of your standard of living during the marriage. This has a twofold purpose. It is used to help determine how much alimony and child support should be stipulated. However, it can also be used to ascertain if there are hidden assets and/or income. 

How is this so? In a lifestyle analysis, the couple’s marital living expenses are calculated and this is matched against all known sources of income, assets and loans. The goal is to determine if the reported income, assets and liabilities were sufficient to sustain the marital lifestyle. If there is a mismatch where the amount of living expenses exceed the amount of declared income, assets and loans, this is a telltale sign of hidden assets.

How else can you proactively protect yourself? Keep your eyes wide open. If you spot signs early, you can protect what is rightfully yours. Read on to know some tactics people employ to hide assets.

Sneaky Ways that Assets are Hidden

What are some unethical ways that your spouse may use in order to avoid sharing all assets with you during the divorce settlement?

 

Here are just of the sneaky tactics he can use to do it:

  • Under report income on tax returns and/or financial statements.  It cannot be used in the financial analysis if it is unreported.

 

      If your spouse is reluctant to supply all of the complete            documents, then he might be hiding information he does        not want you to see.

  • Overpay the IRS or creditors. If your spouse overpays, using joint funds, he is sure to get a refund, after the divorce becomes final. 

  • Make bogus payroll payments.  This applies to a spouse who owns a business. By paying salary to “ghost” employees, money can be transferred and hidden away. Look for written checks that were never cashed. 

  • Pay out unusual debt or give generous gifts.  Often in collusion with friends or relatives, he may pay out money for a debt or give a large gift, with the understanding that it be returned at a later date (after the divorce, of course). Or watch out for invoices to non-existent vendors.

  • Stock Transfers. Stocks or investment accounts can be transferred into the name of family members, business partners or even “dummy” companies prior to the divorce and then transferred back to him once divorce becomes final. 

  • Purchase items that can be overlooked and undervalued.  This is a way to convert cash into assets with more subjective, less tangible value. Often the values are under reported; this could include expensive artwork, antiques, stamp collections or cars, as examples. If you notice a new painting or extensive additions to his coin collection, there could be something going on. 

  • Set up custodial accounts in your child/children’s names.  In the guise of putting in money into something that would benefit your child, such as a college fund, it is possible to divert funds.

  • Hide cash.  You would think this does not happen anymore, but people do hide cash in the house so it is easily accessible. Where are possible hiding places? In envelopes hidden behind wall decorations, in the hollow of drapery rods, air vents or DVD cases. You would be surprised how creative people can get to hide money!

These are just a few scenarios; there are more. Whether it is out of genuine fear of being broke after the divorce or is fueled by sheer greed, or even malice, the act of hiding assets, income and debt is undeniably unethical. More importantly it is illegal and is punishable by law if discovered.

What You Can Do …. The Divorce Discovery Process

With much to lose, proving culpability still lies on the spouse with lesser financial means. Sadly, this is still typically the wife.

Fortunately, the state provides powerful legal tools called “discovery” to help find hidden income and other assets. Finding hidden assets is challenging. And seeking good experienced legal assistance is your best bet to be successful. 

What is discovery? In simple terms, it is the legal procedure for obtaining evidence from other parties. In a divorce, this would be your spouse. The process includes:

Document Demands.  Through your attorney, you can ask your spouse to provide specific documents including tax returns, financial statements, loan applications, and account records.

Interrogatories or “Requests for Admission”.  These are written questions that your spouse must answer in writing. And you can have your spouse formally admit to statements and facts that you believe and know to be true. 

Inspection Demands.  This discovery tool is used for inspecting property such as safety deposit boxes, or coin collection or antiques that your spouse may have.  

Testimony Given Under Oath.  You, your spouse and your lawyers appear before a court reporter in what is called an oral deposition. Your spouse is sworn to tell the truth and must answer questions asked by your attorney truthfully or risk committing perjury.

The discovery process is an effective way of getting financial information from a spouse who has taken the uncooperative path. The court can impose sanctions if they fail to produce documents or charge perjury if found to be speaking less than the truth.  

If there is suspicion that your spouse is hiding assets, it is wise to alert your attorney and Certified Divorce Financial Analyst (CDFA®) as soon as you have any tiny suspicions, so they can take appropriate action to investigate and more importantly, implement measures that will prevent further damage.

Having a good divorce financial planner helping you and your lawyer can help ensure that you gain financial empowerment during the divorce and also thrive in the future. We at Kimberly Surber Divorce Planning will be your partner throughout.  

Give me a call today to set up a free consultation: 907-347-3860

Tags: Divorce, assets, hidden assets, discovery, divorce help, divorce finances, divorce financial advisor, CDFA, divorce financial analyst, divorce attorney, divorce settlement

This information is not intended to be a substitute for seeking legal advice from an attorney. For legal or tax advice please seek the services of a qualified attorney and/or qualified tax professional.

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Kimberly Surber is a Certified Financial Planner®  and a Certified Divorce Financial Analyst®; however such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Information presented is for informational purposes only, does not intend to make an offer or solicitation for the sale or purchase of any securities, and should not be considered investment advice.  Kimberly Surber has not taken into account the investment objectives, financial situation or particular needs of any individual investor. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor's financial situation or risk tolerance. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed here. Past performance is not indicative of future results. Investments involve risk, including loss of principal and unless otherwise stated, are not guaranteed. Information provided reflects Kimberly Surber's views as of certain time periods, such views are subject to change at any point without notice. For a copy of our Privacy Policy, see below.

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