Written by attorney Howard M Lewis

Hidden Assets and Divorce

If you know you’re going to be getting a divorce soon, then you may want to start tracking marital finances. Not only is this necessary to your divorce, it’s also a prudent measure to take so you can see if your spouse has any hidden assets tucked away. Being attentive to the relevant financial details can help ensure that your divorce settlement is fair to you.

Overview of hidden assets

A hidden asset is one that isn’t readily visible in normal accounting records because all usual signs of ownership have been concealed through complicated measures. Diligence and thorough preparation go a long way towards tracing assets which are deliberately disguised by a spouse. Information and involvement are critical for discovering hidden assets. Hidden assets are mostly liquid in nature; examples are bank accounts, stocks, bonds, and mutual funds. The reason why they’re usually liquid is because this type of asset can be easily transferred into the name of a relative, friend, or business entity. Sometimes the funds are transferred into accounts in offshore banks where they cannot be touched under the laws of the country of residence.

Hidden assets and divorce settlements

Hidden assets are especially important in divorce settlements because one of the parties in a divorce may have tried to hide certain assets. If a court doesn’t know about an asset, it can’t force that person to share it with their spouse. Since both spouses lawfully have claim to all marital property for purposes of a divorce settlement, hiding assets is illegal.

Tracking down hidden assets

A good way to start the task of tracing hidden assets is to establish a methodical plan to study all financial records. In general, look for things that don’t add up. For example, if an asset is initially present in documents but suddenly seems to have disappeared then it’s possible that it was diverted into some other unknown account. Here are more examples of good places to look. Old financial statements may help identify suspicious transactions. ATM activity can throw light on cash which may have been placed in some hidden account. In particular, getting a credit report on your spouse is a good idea because it may contain information on financial accounts or credit unknown to you. Some clues to find hidden assets:

  • Income that isn’t reflected on financial statements and tax returns.
  • Cash kept as travelers checks: Locate by tracing bank account deposits and withdrawals.
  • A custodial account set up in the name of a child.
  • Investment made in certificate "bearer" municipal bonds or Series EE Savings Bonds: Since these are not registered with the Income Tax Authorities, they do not appear on account statements.
  • Artwork, antiques, gun collections, hobby equipment, original paintings, expensive carpets and tools: Have everything appraised, and don’t forget to check your spouse’s work office for items.
  • Debt repayment to a friend which actually was never a debt.
  • Delayed disbursements of bonuses, stock options and accounts receivables till after the divorce.
  • Expenses incurred towards gifts, travels, tuition fees or rent of a friend.
  • Retirement accounts that were never disclosed.
  • Deliberate devaluation of property: Allowing rental property to remain vacant or unrepaired so that divorce allocation is done on the basis of the devalued price.
  • Payment of excess income tax and subsequent filing for the tax refund after the divorce.

If you are fairly sure that your spouse has hidden assets, then it may be a good idea to engage an experienced attorney to help you find them.

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