One of the biggest fears you might have during a divorce is the potential for your spouse to hide assets or income, which may reduce the amount of money you receive from property division or alimony. As such, it pays to know some common ways divorcing spouses hide assets, some red flags to watch out for, and what to do if you suspect your soon-to-be ex is being less than forthcoming about their wealth.
Common Methods of Hiding Assets and Income
Some of the most frequent ways that spouses may try to hide income or assets in anticipation of divorce include:
- Overpaying taxes: A spouse may try to conceal assets by overpaying taxes for the current year or prepaying taxes for the next year, hoping to receive that money back in a year or so through a tax refund and perhaps after the divorce.
- Inflating business expenses: Spouses who own businesses may inflate their company’s expenses or take a loan from the business to make the business seem less profitable, which can reduce a spouse’s apparent income or the value of the business if divided in a divorce.
- Overloading 529 accounts: Spouses may seek to decrease your entitlement to equitable distribution assets by putting excessive amounts of money into 529 accounts for your children.
- Prepaying expenses: A spouse may hide money in credit card accounts, effectively gaining a credit they can use to pay for expenses over the coming year.
- Delayed bonuses, commissions, or equity compensation: A spouse may seek to delay reporting of income from bonuses or commissions; furthermore, you must examine any restricted stock which may give a spouse a large payment after the divorce when that restricted stock vests. You may be entitled to a portion of that payment so it is important to look at the unvested stock units and when they were earned.
- Transferring assets to third parties: Spouses may gift or loan money or property to family members or friends with the expectation that they will return those assets after the divorce. In the meantime, the marital assets are diminished at the time of the division.
Red Flags to Look Out For
Potential red flags of concealment of assets or income in anticipation of divorce include:
- Sudden changes in financial behavior, like frequent cash withdrawals or significantly increasing contributions to 529 accounts
- Discrepancies in financial records and tax returns
- A spouse’s reluctance to share financial information or documentation
- A spouse opening new solo financial accounts
Methods of Detecting Concealed Assets
During divorce, a spouse has several means of detecting whether their ex has hidden assets or income to avoid splitting it in divorce or paying more in alimony, including:
- Discovery: During divorce, spouses can serve subpoenas for records and demand depositions to find evidence of potential concealment of assets.
- Reviewing financial records: Thorough review of financial records and tax accounts may reveal discrepancies that signal a spouse’s efforts to hide money.
- Hiring forensic accountants: A forensic accountant can carefully review financial records to trace assets or income from third parties back to a spouse.
Consequences of Hiding Assets and Income
A spouse who gets caught hiding assets or income may face various consequences. For example, the court may hold the spouse in civil contempt for failing to make a full and true disclosure of their finances. The court may also award the other spouse a larger share of the estate for their ex’s misconduct. Finally, hiding assets can permanently damage a spouse’s credibility with the court.
Contact a Family Law Attorney Today
If you suspect that your ex has hidden assets or income during your divorce, you need an experienced divorce lawyer to help you protect your financial interests. Contact Lisa Zeiderman today for a confidential consultation with a seasoned family law attorney to discuss your rights and options when your ex has concealed assets or income.