The 12 Tools Used When a Spouse is Hiding Money in a Divorce

Hiding Money in a Divorce does happen, but it is not as easy to do as people think. Also there are ways to defeat stealing marital assets. Since New York is an Equitable Distribution state, it is important to discover all of the marital assets.

This act of hiding, dissipation or marital waste is illegal and can drastically change the outcome, influencing aspects such as alimony and the division of assets. New York courts take hiding of money in a divorce or hiding other assets very serious. Yet, the challenge of hiding assets, from bank savings to investments and property, often complicates achieving a just division.

Recognizing the methods of hiding money in a divorce, from dissipation to utilizing businesses as cover or creating offshore accounts, is essential in combatting this fraud. Equally, there exists the legal ramifications such as money fines and awards of attorney’s fees. The next sections will delve into strategies for uncovering these covert practices—employing forensic accountants and rigorous financial investigation—to safeguard one’s financial interests and ensure an equitable resolution in divorce proceedings.

Understanding Financial Disclosure Requirements

In New York, the process of divorce mandates that both parties adhere to strict financial disclosure requirements. This starts with Filling out and Swearing to the Statement of Networth. This document is a comprehensive form created by the Courts to capture all of the financial information of the parties. It is also a sworn statement, so lying on it is perjury. It is an initial tool to help determine if a spouse is hiding money in a divorce. The essence of financial disclosure is to provide a clear and complete picture of each spouse’s financial situation. Also the parties are required to produce:

• Tax returns
• Bank account statements
• Investment and retirement account statements
• Property ownership documents
• Debt statements
• Life insurance policy details
• Paystubs for both parties
• Comprehensive information on any business owned

This exchange of information, known as ‘discovery,’ is critical for both spouses to engage in informed negotiations and make equitable decisions regarding asset division. Spouses are bound by law to fully disclose all material facts and information regarding all assets whether marital or claimed as separate property.

This duty continues throughout the litigation. Parties will be required to update the Statement of Networth several times during the course of the litigation.

As you can see, because the courts and law require complete transparency, hiding money in a divorce is not that easy.

Common Tactics for Money in a Divorce as well as other Assets

Hiding money in a divorce is a tactic employed with the intent to stack the deck. Spouses resort to various methods to hide money, each with its twist:

• Temporary Transfers and Purchases:
  • Transferring stocks or investment accounts to another person’s name.
  • Buying high-value items such as antiques or art, which might be overlooked or undervalued during asset division.
• Income Manipulation:
  • Deferring salary, commissions, bonuses, or other income until after the divorce is finalized.
  • Overpaying on taxes or debts to secure a refund post-divorce.
• Secret Accounts and Overpayments:
  • Stashing cash or assets in a safe deposit box or setting up custodial accounts under a child or third party’s name.
  • Overpaying credit cards or debts, then requesting refunds or using the credit for purchases later.

Signs that a spouse might be engaging in these tactics include sudden claims of lower asset values or income, reluctance to share financial details, and unexpected changes in spending or saving habits. Business owners might delay lucrative deals, pay non-existent employees, or inflate expenses to reduce apparent profitability. Non-business owners could set up trusts, “gift” money with the expectation of its return post-divorce, or divert marital assets for a new partner’s expenses.

Uncovering these hidden assets often requires a meticulous approach, involving:

• Investigation of Financial Behavior: Monitoring for sudden changes in financial habits, secret accounts, or defensive attitudes regarding finances.
• Professional Assistance: Engaging divorce attorneys and forensic accountants who specialize in discovering hidden assets, including those tucked away in unpredictable places like undisclosed accounts, investments, or even cryptocurrencies.
• Lifestyle Audits: Here we look to what a person spends to determine what they earn.

These strategies underscore the importance of vigilance and professional guidance in ensuring a fair and equitable division of assets during a divorce.

Legal Consequences of Hiding Money in a Divorce

Hiding assets during a divorce is not only unethical but also illegal, carrying severe legal consequences that can significantly impact both the process and the outcome of a divorce settlement. Understanding these consequences is crucial for anyone going through a divorce, as it underscores the importance of transparency and honesty in financial disclosures. The penalties for hiding assets can vary by state but generally include:

• Financial Penalties and Legal Costs:
  • The court may order the guilty spouse to pay fines or cover the attorney fees and court costs incurred by the other party.
  • In cases where hidden assets are discovered, the division of property may be adjusted to favor the innocent party, potentially awarding them a larger share of the marital assets.
  • States like New York go further by requiring the spouse who hid assets to pay for any investigative or legal costs the other spouse incurred because of the deceit.
• Criminal Prosecution and Jail Time:
  • Spouses caught hiding assets can face criminal charges, including fraud, contempt of court, and perjury. The severity of these charges can lead to jail time, particularly if tax fraud is involved.
  • Similar actions can result in contempt of court charges among other criminal penalties, emphasizing the serious legal repercussions of such behavior.
• Impact on Divorce Proceedings and Settlements:
  • The court can dismiss claims or set aside a divorce settlement if it’s found that one party hid assets, leading to a reevaluation of asset division, alimony, and child support calculations.
  • Loss of credibility in court is another significant consequence, as it can influence the judge’s decisions on various aspects of the divorce settlement, further disadvantaging the deceitful spouse.
  • Non-compliance or deceitful behavior during the financial disclosure process can lead to sanctions, including being compelled to answer truthfully under the risk of perjury charges.

These consequences highlight the critical importance of full transparency in financial disclosures during divorce proceedings. Engaging in the concealment of assets not only jeopardizes one’s financial future but also carries the risk of criminal prosecution and lasting legal repercussions.

Methods for Uncovering Hidden Assets

Hiding money in a divorce can leave a trail. To effectively unearth hidden assets during a divorce, a meticulous and strategic approach is essential. Here are the key methods for uncovering hidden assets, structured to enhance understanding and action:

Examination of Financial and Business Records

• Financial Documents: Start with a thorough review of bank records, tax returns, and credit card statements. Look for discrepancies or irregularities that might indicate concealed assets.
  • Tax Returns: Pay special attention to tax returns from previous years to spot inconsistencies or hidden income sources.
  • Bank Accounts: Scrutinize all bank statements, including joint and personal accounts, for unusual transfers or transactions.
• Business Records: If either spouse owns a business, delve into its financial records. Watch for signs of manipulated records, such as inflated expenses or underreported profits. This could hint at attempts to hide money.

Investigative Techniques

• Property Searches: Utilize the Tax Assessor’s Office to check for any additional properties owned by either spouse. Uncovering undisclosed real estate can significantly affect asset division.
• New Financial Activities: Investigate recent financial activities and property acquisitions. This includes probing into the existence of crypto accounts, where assets might be hidden in digital currencies.
• Subpoenas: Attorneys can subpoena bank and business records directly from the bank or business. We had a case where we subpoenaed one account, and it ultimately led us to 13 different bank accounts in four different banks.

Professional Assistance and Legal Tools

• Forensic Accountants: Hiring a forensic accountant can be pivotal. They specialize in analyzing financial records to detect anomalies and hidden assets, ensuring a comprehensive account of the estate.
• Legal Support: Engage with a divorce attorney to explore options like retaining a forensic accountant or obtaining financial documents through discovery.
  • Subpoenas: Attorneys can issue subpoenas to banks, investment firms, and employers to disclose documentation of accounts owned by a spouse.
  • Depositions: Deposing your spouse or those privy to their financial affairs under oath can unearth valuable information.

By employing these methods, spouses can systematically search for and potentially uncover hidden assets. This process not only aids in ensuring a fair division of assets but also upholds the integrity of the financial disclosure process in divorce proceedings.

Protecting Yourself Against Asset Hiding

To safeguard against the concealment of assets in divorce proceedings, individuals can take proactive steps at various stages of their marriage and divorce. Implementing preventive measures and consulting professionals are key strategies in protecting one’s financial interests:

• Stay Involved in Finances:
  • Regularly review bank and credit card statements, and match transactions with receipts.
  • Keep track of all financial records, including the status of stocks, retirement accounts, and significant purchases.
  • Run monthly financial checks to detect any unusual or fraudulent activity.
• Legal and Financial Consultation:
  • Engage an experienced family law attorney if you suspect your spouse is hiding assets.
  • Consult with a financial advisor to assess both assets and liabilities, ensuring a comprehensive understanding of your financial standing.
  • A forensic accountant can be invaluable in identifying discrepancies and hidden assets.
• Preventive Legal Measures:
  • Consider a prenuptial agreement to clearly delineate what constitutes separate property, protecting it in the event of a divorce.
  • In community property states, understand that marital property is equally divided, while separate property remains with the original owner. Conversely, equitable distribution states divide property based on fairness, taking into account various factors.
  • Create an inventory of all assets, including those owned jointly and individually. Know the details of all financial accounts and who has access to them.
• Asset Protection Strategies:
  • Utilize Trusts for Divorce Planning, such as a Domestic Asset Protection Trust (DAPT), to safeguard assets for children, ensuring they are not considered marital property.
  • After divorce, close joint credit card accounts and establish an emergency fund to maintain financial independence.

Implementing these strategies not only aids in maintaining transparency and fairness but also fortifies one’s financial security against the risks associated with asset hiding. Monitoring accounts, maintaining thorough records, and seeking professional assistance are crucial steps in navigating the complexities of divorce and asset division.

The Role of Legal Professionals

In navigating the complexities of a divorce, especially when it comes to the division of assets, the role of legal professionals becomes indispensable. An attorney is not just a legal representative but also a crucial advisor who ensures that all financial aspects are transparently and fairly managed. Here’s how they make a difference:

• Gathering and Organizing Financial Information:
  • Documentation: Attorneys facilitate the collection of necessary financial documents. This includes bank statements, property deeds, tax returns, and more.
  • Interrogatories and Inspection Demands: They draft detailed questions and demands for documents that the other party must answer or produce, which can reveal hidden assets.
  • Testimony: Legal professionals can arrange for depositions, where parties and witnesses provide sworn testimonies that can uncover discrepancies or hidden assets.
• Strategic Legal Actions:
  • Discovery Process: This critical phase involves demanding documentation, conducting interrogatories, and executing inspection demands to uncover any hidden assets.
  • Categorization of Assets: Lawyers help in distinguishing assets as separate, marital, or commingled, which is key in determining how they should be divided.
  • Out-Spouse Support: For a spouse unfamiliar with the household’s financial intricacies, attorneys serve as the guiding hand in understanding and uncovering the full financial picture.
• Expertise in Uncovering Hidden Assets:
  • Specialized Knowledge: Experienced family law attorneys possess the acumen to track down and identify assets that a spouse may attempt to conceal.
  • Professional Network: They often work alongside forensic accountants and other specialists to thoroughly investigate and uncover hidden assets or income streams.

The collaboration between a client and their attorney is crucial in ensuring that all assets are accounted for and that the division is as fair and equitable as possible. By employing a combination of legal knowledge, investigative techniques, and strategic planning, attorneys play a pivotal role in protecting their client’s interests and ensuring transparency throughout the divorce proceedings.

Conclusion

Navigating the treacherous waters of divorce, particularly when it involves the concealment and division of assets, underscores the critical need for transparency, legal acumen, and a meticulous investigative approach. Through the examination of common tactics used to hide assets, the legal repercussions of such actions, and the strategic methods for their discovery, this article has laid a comprehensive foundation for understanding the complexity of ensuring equitable asset division. It is evident that the vigilant involvement of legal professionals, coupled with an informed and proactive stance by the involved parties, plays an indispensable role in safeguarding financial interests and upholding the integrity of the divorce process.

In light of the challenges and intricacies presented, the importance of seeking expert legal guidance cannot be overstated. For those facing the often daunting prospect of asset division in divorce, the support of knowledgeable and experienced legal advisors is invaluable. If you or someone you know is navigating these challenging waters, consider reaching out to Port and Sava at (516) 352-2999 for a Free 15 Minute Telephone Consultation. By ensuring all assets are transparently accounted for and equitably divided, parties can look toward a resolution that respects the financial rights and futures of everyone involved, paving the way for a fair and just closure.