If you are going through a divorce, you already know that your marital assets will get split between you and your spouse. The nature of the split depends on whether you live in a community property state or a common-law property state. What you may not have considered are assets that your spouse hasn’t owned up to, and perhaps you don’t even know about them. Yet.
However, there are ways to win at the game of asset hide and seek. Every divorce attorney knows how to use the discovery stage of a divorce action to check for and uncover possible hidden treasures.
Start With a List of Known Assets
One of the first things you and your spouse should be doing is make a list of all assets owned by both of you. They will fall into three main categories, such as marital, separate, or comingled, and an attorney can help you sort them out.
If Your Spouse Has Controlled the Assets During Your Marriage
It is not unusual for one spouse to have been in charge of bookkeeping, paying expenses, taxes, etc. during the marriage, most likely because that spouse is more of a financial expert. If you are a non-financial expert, this can mean that you lack certain financial facts about your assets and debts. This places you at a distinct disadvantage.
First, ask your spouse to show you all financial documents, from bank accounts to tax returns, to retirement accounts, to loan papers, and more. If he or she cannot lay their hands on the necessary papers immediately, the relevant institution can forward them.
How Assets Can Be “Hidden”
While hiding assets isn’t all that unusual, there are only a few methods used by the average spouse.
- First, your spouse may simply deny any missing assets exist.
- Your spouse may transfer ownership of the asset to a third party, such as a trusted relative.
- He or she may claim the asset/document simply cannot be found.
- Your spouse may work with a trusted friend or relative to create a false debt. This involves creating a fake loan, making payments, and having the payments returned to your spouse following the divorce. When criminals do this, it’s called money laundering. When a married party does it, it’s called hiding cash.
- If your spouse owns a business, a list of salaries (do these employees actually exist?) and business expenses need to be checked. All business expenses should have a receipt for tax purposes. If your spouse cannot produce receipts, there may be a problem.
It may seem that it can be difficult to trace assets that are deliberately hidden; however, much can be revealed during the discovery process described below, as most actions will leave some kind of a paper trail.
Several years of past tax returns should be checked by a tax advisor, who is trained to find discrepancies and undisclosed income.
If Your Spouse Won’t Produce All Financial Records
Unfortunately, some spouses don’t want all the financial information from being available because they may have hidden a few assets in the larger marital pot.
Determining whether assets are marital, separate, or comingled can get quite legally complicated. In such an event, you should be consulting with a divorce attorney, who will most likely refer you to or consult with an accountant.
If there is any doubt about what the assets are, your attorney will probably conduct a “discovery” before going to court. As the name implies, this is meant to discover information that has not been made available. Discovery includes several methods of getting information from the “other” side and includes but is not limited to the following:
- Your attorney demands that your spouse produce a list of named documents, such as tax returns, bank accounts, or valuations of certain assets. If your spouse refuses, a judge can order him or her to do so and can punish your spouse for continued refusal to obey an order of the court.
- Your attorney can conduct an interrogatory, usually in writing. Again, as the name indicates, your spouse will be interrogated (asked specific questions) that he or she is legally obligated to answer.
- Your attorney may ask to inspect any property in question, such as a safe deposit box, a piece of art, and anything else that may be deemed of value.
- Your attorney may ask for an oral deposition. This is not unlike an interrogatory, but this is done in person, and answers are spoken instead of written. Such a deposition takes place in the presence of your spouse, his or her attorney, and a court reporter who takes down the testimony. This process is conducted “under oath,” and the parties swear to tell the truth.
This discovery process will likely produce some evidence of hidden or undervalued assets. It is assumed that your spouse will answer all questions honestly, and if he or she does not, there can be perjury charges. Lying during discovery is a serious offense.
A divorce is rarely a friendly event. Frequently, both parties want to cling to as many assets as they can, either because they feel they deserve it, or out of spite. With the help of a good divorce attorney and tax accountant, you can eliminate most ways in which spouses keep assets hidden.
The legal process can get difficult, which is why we always recommend that you seek the assistance of counsel; or at least have a consultation. Schedule a consultation with one of our attorneys today to review the issues of your case, the legal options you may have, and certain rights that pertain to your unique situation.
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