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Searching for hidden assets in a divorce

| Jul 13, 2021 | Family Law

Divorce can pose complicated financial issues, especially for a spouse who was not a business owner or substantially involved in the family’s finances. In some cases, particularly in high-asset divorces, a spouse may try to hide assets they do not want discovered to avoid support payments or property division. Preparation and other actions can help preserve your rights during the asset and debt division portion of your divorce.

Cost

Looking for hidden assets may be among the most complicated and expensive part of a divorce. Assets are usually placed with third parties or hidden by false documents. The first step is to determine whether the benefit of finding these assets is worth the cost and time associated with searching for them.

The process is more difficult if there is no detailed list of assets and debts and other documents revealing the location of these assets. Keep in mind that it is even more costly to trace the ownership of assets transferred into another person’s or entity’s name.

Hidden assets

The most common types of hidden assets include cash, bonds, mutual funds, insurance policies, annuities, stocks, travelers’ checks, savings bonds, and bearer municipal bonds.

Cash may also be converted into personal property such as art, jewelry, collectibles, antiques, vehicles, boats, and aircraft. Examples of asset conversions that are often overlooked or undervalued include hobby equipment, firearm collections, paintings, collector-quality rugs, and tools.

Methods

Spouses can try to hide assets by involving relatives or acquaintances who may be unaware of their involvement. Personal possessions or investment documents are sometimes placed in safety deposit boxes held by a family member or friend. A spouse may transfer large amounts of money to a trust, or “gift” money to individuals with the understanding that the money will be returned later.

Another method involves paying down mortgages and credit cards. Repayment of false debt to friends or relatives often appears as a valid use of funds. Payment for gifts, travel, rent, college tuition or other expenses for a new romantic partner might also be seen as valid.

Other strategies include establishing custodial accounts under a child’s social security number and transferring assets into pension, profit-sharing, 401(k) and Keogh plans.

Employees may have their employers delay contracts, raises or bonuses until after their divorce. Business owners can delay the signing of lucrative contracts until after the divorce, while not reporting income on tax returns and financial statements can reduce the value of the business.

Discovery techniques

A spouse should have accurate and timely information on their soon-to-be former spouse such as their full legal name and any variations such as nicknames and aliases, as well as current and former addresses. Social security numbers, birthdates and addresses for their family members are important if any assets were transferred to them.

That spouse’s lifestyle also shows clues. This includes their travel activities, where they stay, and their travel companions. Hidden assets often finance vehicles, clothing, and other costly purchases.

Other clues include whether a spouse receives automatic transfer of funds or an allowance, and whether their paycheck is deposited into a separate account. Mailing personal credit card statements to a business address is also suspicious.

These sources may also provide important information about potential hidden assets:

  • Tax returns.
  • Savings accounts and money market funds.
  • Checking account statements and cancelled checks.
  • Business cash flow procedures.
  • Credit card receipts.
  • Credit card reports for open accounts that are not being used.
  • Insurance statements for policy cash values.
  • Bank statements for cash and check deposits, ATM withdrawals, and check payees.
  • Off-shore accounts.
  • Loan applications and personal net worth statements.
  • Property deeds, Uniform Commercial Code corporate records, vehicle titles and other public records.

Attorneys can help seek assets and develop a strategy for dividing property. They can also protect your rights in divorce-related property negotiations and proceedings.