It is not unusual for a spouse to hide income and assets, especially if the divorce action has been planned well in advance. A spouse may want to hide income and assets for a variety of reasons. When these financial issues arise in a divorce, it can sometimes be difficult to keep track of any unreported income and hidden assets.
Most Common Types of Hidden Assets
Hidden Assets come in many forms, the most common include cash, bonds, insurance policies, mutual funds, annuities, stocks, pension funds, 401Ks and IRAs. Also, a spouse may convert cash into personal property such as antiques, automobiles, boats, art, jewelry or guns. These are examples of asset conversion that may be overlooked or undervalued in a divorce action.
Can Hidden Assets Be Discovered?
Finding hidden assets is often one of the most difficult tasks during the divorce process but through diligent and effective preparation, it is possible to discover hidden assets not disclosed or acknowledged by the opposing spouse.
The first step is through the discovery process by serving interrogatories on the opposing spouse, taking his or her deposition and issuing subpoenas to third parties such as banks. If the opposing spouse fails to produce the documents requested, the court can compel the opposing spouse to produce the requested documents, sanction them accordingly and order them to pay attorney’s fees and costs.
The second step is to consider hiring an investigator to trace the transfer of ownership of assets into another individual’s name or other entities’ names. Hidden assets are typically placed with a trusted third party or behind false documents. It is vital to have the names, nickname(s) and aliases of family members or close friends who may assist the spouse in hiding assets along with their current and past address information.
Specific information concerning your spouse’s lifestyle may reveal the likelihood of hidden assets. If debt has not been increased and there was no inherited money then there is an excellent possibility that unreported income is supporting your spouse’s lifestyle and other hidden assets. Conducting a lifestyle analysis to compare what your spouse reports as income to his or her lifestyle can uncover hidden assets and unreported income.
Here is a list of questions that may help.
- Is your spouse a frequent traveler? When they travel what type of hotels do they frequent and what type of activities does your spouse engage in when they travel?
- Do they gamble, travel to banking havens or play golf?
- Who are their friends? What type of people are they and what are their interest?
- What types of purchases is your spouse making, what kind of car does he or she drive, is there a boat or other like toys?
- Is there a disparity between the lifestyle your spouse leads and the income reported?
- Is your spouse’s monthly credit card and banking statements mailed to the marital home, the spouse’s office, or accessible only be email?
- Are there large amounts of cash under your spouse’s control?
- Who is your spouse’s accountant and who prepares your spouse’s tax return?
Where To Look For Hidden Assets
There are many ways a spouse might conceal assets and the ways vary greatly with the individuals involved. In an attempt to hide assets, a spouse may involve the help of a family member or a close friend and often these individuals are unaware they are being involved in a scheme to hide assets. Another method of hiding assets is to place the asset such as investment certificates or other personal items into a safety deposit box in the name of a family member or close friend.
A spouse might conceal assets in plain sight by paying down a mortgage, credit card balances or other liabilities. A spouse may even give cash or other assets to a family member or close friend to hold until the divorce is finalized. Keep an eye out for things like having to make repayments on a debt to a family member or a close friend. It may seem to be a legitimate debt at first but it may be a form of another hidden asset.
Custodial accounts can be established by a spouse under a child’s name and social security number. A spouse may even transfer assets into pension accounts, profit-sharing accounts, a trust or a 401K account in an attempt of hiding assets from the opposing spouse.
A spouse who owns a business may use the business to conceal assets by not recording cash receipts or by paying a non-existing employee. Additionally, the value of a business before the divorce can be lowered by delaying the signing of a contract for goods or services until after the divorce is final.
Your spouse’s tax returns for the past 3 to 5 years can be an excellent source of information in locating hidden assets. The tax returns will show income earning assets, the sale of assets and the source of all income such as wages, salaries, interest, dividends, rental income, business income and the gains and losses from the sale of stocks. Their W2 will show whether your spouse has a deferred compensation plan.
Saving accounts and money market accounts could point to hidden assets such as stocks that pay a dividend or a bond that pays interest. Your spouse’s checking account could reveal the purchase of real property or other investments.