Searching for Hidden Assets During Divorce

The divorce process can be difficult enough, even when you have access to all the information you need to negotiate a fair marital settlement agreement or get a fair trial in court. But it will be more complicated and stressful if you suspect your spouse is putting a thumb on the scales by hiding money or other assets. Still, there are important tools you can use to find hidden assets during your divorce—or even afterward.

Why Some Spouses Hide Assets in Divorce

The main reason some spouses try to hide assets is to prevent their soon-to-be ex from getting a fair share of the couple's marital property. The rules for dividing property in divorce vary from state to state, but most states require a fair (equitable) distribution of assets and debts. A few call for an equal 50/50 split. Either goal can't be met without complete and accurate information about the couple's finances.

Similarly, alimony and child support decisions depend on knowing how much each spouse earns, and those decisions won't be fair if one spouse is hiding income (such as from overseas accounts or real estate investments) or has made it look like they're earning less than they are (for instance, by inflating business expenses).

This is why states typically require spouses to submit financial declarations as part of the divorce process. These disclosures must generally be signed under oath and must include detailed information about income, other assets, expenses, debts, and other liabilities.

Warning Signs and Common Ways of Hiding Assets

If you're headed for divorce, you should be on the alert for any signs that your spouse might be hiding assets from you, including:

• Unusual financial transactions. Large withdrawals from joint bank accounts could indicate that your spouse is hiding cash. Similarly, unexplained transfers could be a sign that your spouse has opened other accounts you don't know about or is transferring money to a friend or family member that will be returned after the divorce.
• Missing bills and financial statements. These days, many people get their credit card bills, bank statements, or other financial statements digitally rather than by mail. You should have access to the email account(s) where these documents (or alerts about online statements) are sent. If you don't—or if printed statements suddenly stop coming in the mail—your spouse could be trying to hide something from you.
• Changed passwords to online accounts. It's a clear red flag if you suddenly can't access online financial accounts because your spouse has changed the passwords and hasn't shared the new ones with you.
• Discrepancies in financial documents. If you haven't already been paying close attention to tax returns and other financial documents, an impending divorce should change that habit. When you know what to look for, tax returns can reveal assets you didn't know about. Also, discrepancies between tax returns and other documents (like loan applications or financial disclosures in divorce) could indicate that your spouse is hiding something.
• Large gifts, loans, or transfers to family or friends. Some divorcing spouses try to hide assets by making sham gifts or loans to friends or family members—or by transferring real estate or other property to them—with the understanding that the recipient will return the money or retransfer the property back to them after the divorce.
• Sudden complaints about business, investment, or income losses. If your spouse runs a business or has a professional practice that's historically been doing well, you should be wary of claims about recent losses or business downturns. People can hide business income in all sorts of ways, including by inflating expenses and deferring income. Similarly, some employers may collude with a spouse to postpone bonuses or other income until after the divorce.
• Lifestyle that's out of line with reported income. If you and your spouse are already separated, pay attention to signs of a lifestyle and spending habits—such as an expensive new car or lavish vacations—that are out of line with what your spouse is claiming in income.
• Pressure to sign financial documents or a settlement quickly. You should be concerned if your spouse is pressuring you to sign a settlement or any financial documents without giving you time to review them carefully and seek outside advice (including from a lawyer or accountant) if you're not sure about any details.
• Hesitance about discussing finances or sharing information. Ask your spouse about anything you've seen in your financial records that doesn't make sense or is surprising. It could be the result of an honest oversight, or there might be a reasonable explanation. But if you don't get straightforward answers, or your spouse is hesitant to give you complete access to financial records, it may be time to consult a lawyer (more on that below.)

How To Search for Hidden Assets

You can start a simple asset search by examining all of the financial documents that you already have access to, including tax returns and joint bank statements. (And if you're still living with your spouse, keep copies of these documents outside the home.)

A close review of these documents may indicate the existence of income or other assets you didn't know about, but they rarely provide the kind of evidence needed to prove the existence and value of hidden assets in your divorce. Fortunately, there's a formal legal process in divorce—known as "discovery"—for doing just that.

Using Discovery to Uncover Assets During Divorce

The discovery process uses various tools for getting information from your spouse before your divorce case goes to trial. Those tools include:

• Demands for the production of evidence. You may ask your spouse for copies of financial documents that you haven't already been able to see, such as loan applications, statements from any bank or investment accounts your spouse may own or control, and business records. You may also request an inspection of electronic records or property (like a safe deposit box).
• Interrogatories. You may submit a list of written questions that your spouse must answer under oath.
• Requests for admission. To narrow down your asset search, you may ask your spouse to admit (or deny) the truth of certain statements or the genuineness of certain documents. Here again, the answers are under oath.
• Depositions. A deposition is a form of questioning under oath that's similar to trial testimony but takes place outside of court (usually in a lawyer's office). During a deposition, you can ask your spouse specific questions about anything that's already come to light through the other discovery tools, as well as other remaining questions. You can also depose other witnesses, such as your spouse's accountant or business partner. Depositions are recorded and may be used as evidence at a later trial.

State laws (or court rules) provide penalties for anyone who doesn't cooperate with discovery requests.

The Role of Forensic Accountants

In divorce cases that involve particularly complicated finances (and the potential for significant hidden assets), forensic accountants can help with asset searches. These experts have specialized knowledge and tools for finding evidence of hidden assets, including financial accounts and real estate in foreign countries, trust funds, and complex investment strategies. They're also skilled at analyzing these records and tracing financial transactions.

However, asset investigation services aren't appropriate in all divorces. An experienced divorce lawyer should be able to evaluate your situation and tell you whether you'll need this level of expert assistance in your case—and whether a forensic accountant is likely to uncover enough hidden assets to be worth the expert's fees. If so, your lawyer can bring in trusted experts and work closely with them throughout the discovery process.

Penalties for Hiding Assets in Divorce

If you're wondering how to hide money or other assets in your divorce, you're missing the most important question: What are the potential consequences of hiding assets? It is possible that you could get away with your deception, but your spouse has many ways to find out the truth (as discussed above). When that happens, you could face serious penalties, including:

• Criminal charges. As we've discussed above, you'll usually have to file financial disclosures with the court—with your signature (under penalty of perjury) that the information is complete and accurate, to the best of your knowledge. You'll also be vulnerable to criminal charges for perjury if you lie at a deposition or provide false information in response to other discovery requests. If you're found guilty, you could face prison time, fines, or both.
• Contempt of court. If a judge orders you to respond to discovery requests or submit financial disclosures in your divorce, and you disobey that order, your spouse may ask that you be found in contempt of court. A contempt finding can result in fines or even jail time.
• Sanctions in your divorce. Depending on where you live, the judge in your divorce may have other ways of penalizing you for hiding assets or not responding to discovery requests. For instance, the judge may order you to pay money to your spouse, including for attorney's fees and other costs related to searching for the assets. The judge might also award a greater share—or even all—of the uncovered asset to your spouse.

What If You Discover Hidden Assets After You've Divorced?

Sometimes, evidence (or even suspicion) of hidden assets doesn't emerge until after the divorce. For instance, you might learn that your spouse has bought an expensive house or is traveling extensively after crying poor during the divorce proceedings. Depending on your state's laws (and sometimes how long it's been since your divorce was final), you may seek to reopen your divorce or have it set aside due to misrepresentation or fraud.

Do You Need a Lawyer to Help Find Hidden Assets?

Depending on your understanding and comfort level with tax returns and other financial documents, you might be able to start the process of looking for hidden assets on your own. But if there are indications that your suspicions are warranted, you may need a lawyer's help—especially a family law attorney with experience with asset searches.

Conducting discovery takes specialized legal knowledge of evidence rules, court procedures, and strategies. Also, if your situation calls for additional expert help, a knowledgeable lawyer can refer you to good forensic accountants. Finally, if you're hoping to reopen or set aside your divorce after learning about concealed assets, a local attorney can explain how the laws in your state apply to your specific situation.