Full disclosure of all matrimonial assets by both parties is a basic principle of divorce. It has to be known what is in the pot before it can be divided up fairly. Accordingly it is very far from unknown for a spouse to hide some of his or her assets and by not disclosing them reduce to the pot in their favour.
Common ways in which a spouse may undervalue or disguise marital assets include:
- Personal possessions, hobby equipment and tools that are overlooked or undervalued.
- Income that is unreported on tax returns and financial statements;
- Cash kept in the form of securities. You may be able to find these by tracing bank account deposits and withdrawals;
- A trust account set up in the name of a friend or other person;
- Investment in certificate ‘bearer’ municipal bonds or Savings Bonds. These do not appear on account statements;
- Collusion with an employer to delay bonuses, stock options or raises until a time when the asset or income would be considered separate property;
- Debt repayment to a friend for a phony debt;
- Expenses paid for a girlfriend or boyfriend, such as gifts, travel, rent, or tuition for college or classes;
- Retirement accounts that your spouse never tells you about.
In addition, a business owners may try to hide their assets in these ways:
- Skimming cash from the business;
- Salary payments to a non-existent employee, with checks that will be voided after the divorce;
- Money paid from the business to someone close – such as a father, mother, girlfriend, or boyfriend – for services that were never actually rendered (the money is given back to your spouse after the divorce is final);
- A delay in signing long-term business contracts until after the divorce. Although this may seem like smart planning, if the intent is to lower the value of the business it is considered hiding assets.
You may have difficulty finding these items or getting the proof you need to show they exist. Formal discovery procedures through litigation may help. For instance, you could require an affidavit from your spouse’s boss or employer. But you may also need to hire a forensic accountant or a private investigator. A forensic accountant is an accountant who is trained to look into accounting practices in order to gather evidence that can be used in court.
Always document the family finances before filing for divorce. If you suspect that your spouse may attempt to hide assets, it’s best to start investigating your household and business finances before initiating divorce proceedings. Keep copies of important documents such as tax returns, bank account statements, and pay stubs outside the home if you’re still living with your spouse or partner.