When it comes to separating assets during a divorce, there is a common tendency for one party to feel they are getting an unfair share of the marital pot in the property settlement.
This can lead some to attempt hiding assets from the court and their soon-to-be ex in an effort to keep them from being divided during the divorce; an act that is not only immoral, but also illegal.
Family law attorneys are specifically trained to uncover any illicit attempts to ferret away marital property during the discovery process, so the risk of being caught is fairly high. Additionally, technology has made this process even easier for lawyers and consequently increased the difficulty in getting away with it.
While the potential chance of keeping a larger portion of money or property for yourself may seem tempting — particularly with the resentment that often permeates divorce proceedings — it is important to understand the inherent risks involved with trying to pull a fast one over your judge and spouse when it comes to property disclosure.
Reasons people try hiding assets
The explanations behind why a spouse would attempt to conceal wealth from the court will vary depending on each unique situation. One of the most common reasons someone may wish to hide property during a divorce is simply that the law requires marital assets to be split, and a party may disagree with how their jurisdiction wants to divide the marital pot.
Depending on a number of factors, such as whether you live in a community property or equitable distribution state, your length of marriage and each spouse’s earning potential, you may have a higher chance of getting less in a coming divorce settlement.
This could obviously create a motive for someone to hide the true amount of marital property that exists if they feel they deserve a larger share than the court will likely award.
Additionally, it could be seen as beneficial to a party to undervalue their earnings in an attempt to receive a lower child support or alimony obligation.
Income is a major factor in most support formulas, so there could be an incentive to withhold certain aspects of your income from your financial declaration.
Finally, some may simply wish to deprive their spouse of an asset’s use, value or enjoyment. The tensions that run high during divorce frequently lead to irrational and vindictive behavior, so it’s not hard to imagine someone attempting to keep or destroy a piece of property that is important to their spouse simply out of spite.
Common methods of hiding assets
Some of the oldest tricks in the book when it comes to concealing wealth include simply giving cash or property to a friend or family member to hold while the divorce is proceeding, selling assets at prices significantly lower than their value, using a secret bank deposit box to store cash and valuables or even destroying property.
The hope here is that whatever is given away for safekeeping, hidden or destroyed will be overlooked when the court attempts to calculate the total marital pot.
This can also be done through more sophisticated means — especially for business owners — such as falsified transactions, classifying personal expenses as business expenses, the use of shell corporations, groundless adjustments to salary, unexplained demotions or even anonymous digital currency like Bitcoin.
These attempts may have a higher chance of succeeding if your spouse wasn’t involved in household finances and doesn’t have an attorney; however, there is a good chance your spouse will have legal counsel skilled in uncovering your efforts if you have significant enough assets to go through the trouble of hiding them.
The imagination is truly the limit when it comes to people conceiving new ways to withhold money and property from the court.
Some are as old as divorce itself while others have become more advanced in the modern era, but the fact remains that in this day and age you are probably not going to get away with it, and the penalties for getting caught can be steep.
Consequences of getting caught
During a divorce, each spouse is typically required fairly early in the case to complete a financial declaration that discloses all income streams and assets. By signing off on this official document, each party is swearing under oath that the contents are accurate.
If during the discovery process it comes out that you or your spouse knowingly omitted certain financial information or assets with the intention of depriving the other party of their share, the judge has a large range of discretion to impose punishment.
Penalties can include having the guilty spouse receive a smaller share of the marital assets, requiring them to pay attorney fees of the innocent party, awarding the innocent party the assets that were uncovered or even criminal charges for contempt of court and perjury that can land you jail time.
For example, in most states, any money earned during the marriage will be considered marital property and be up for division. If your wife has a secret bank account that is not disclosed in her financial declaration but is uncovered by your attorney during discovery, you would be eligible for a portion of that account.
However, since she tried to conceal that money from the court, the judge may decide to levy additional penalties against her. You may be awarded a larger distribution — or even the full amount of the money in the account — instead of just the marital share that would have been given under normal property distribution laws had she been honest from the beginning.
To discourage this sort of fraud, some states also allow for a divorce case to be re-opened after it has been finalized if you later learn your spouse did not fully disclose assets during the initial proceedings. This means that not only will the dishonest spouse lack security in the final decree, but also allows for reallocation of assets to favor the innocent spouse.
And while the potential economic ramifications are significant, what may be the most detrimental aspect of being caught hiding assets is the fact that you have just ruined your credibility in the eyes of the judge for the remainder of the case.
You have just painted yourself as the villain and your spouse as the innocent victim, and that will likely carry over into other areas as you progress through the divorce.
Going back to the example above, why should the judge believe your wife when she claims she needs alimony after she has already lied under oath and had a secret bank account full of cash?
Clearly, the temptation to hide money or property will exist for most people when going through divorce, particularly if you feel like your spouse did not contribute toward the marital estate.
However, the consequences of getting caught weighed against the potential benefit make it unlikely to be worth taking the risk.
Though you may feel like you’ve come up with a foolproof method to get away with it, attorneys have seen it all before and are very good at figuring these sort of tricks out. This is one area where learning you aren’t as clever as you think can really cost you in the long run.
Mat Camp is a former Lexicon Services Online Editor, who focused on providing a comprehensive look into all aspects of the divorce experience. On MensDivorce.com, he concentrated on issues, such as parenting time, custodial rights, mediation, the division of assets, and so much more.
Mr. Camp used the wealth of experience of Cordell & Cordell attorneys to bring tangible answers to reader questions in Ask a Lawyer articles, as well as offer a step by step process through the divorce experience with Cordell & Cordell Co-Founder and Principal Partner Joseph E. Cordell in Divorce 101: A Guide for Men.
Mr. Camp used thorough research to highlight the challenging reality that those who go through divorce or child custody issues face. He helped foster the continued success of the Men’s Divorce Survival Guide, the Men’s Divorce Podcast, and the Men’s Divorce YouTube series “Attorney Bites.”