Hiding Assets and Divorce: The Red Flags

When they divorce, both spouses must disclose their assets and debt honestly and fully. However, when one spouse has been mulling divorce, he or she may be tempted to hide assets that are subject to distribution because they are marital property. Even when the spouses go at each other with “hatchets and hand grenades,” so to speak, few believe that a partner would conceal assets in order to cheat about a property settlement, alimony or child support order. But people do.

Asset concealment happens more often than many people know, so divorcing spouses should watch for red flags. Dissipation of marital assets is the most common form of economic misconduct. Very often, when one party contemplates a divorce, he or she hides assets that might be divided in the property settlement.

Forensic accountants and divorce lawyers caution that when a partner becomes secretive about financial matters, or complains about money or debts, or makes unusual purchases, it may mean that he or she is hiding assets.

The spouse who suddenly becomes secretive about money matters may be evasive because he or she has something to hide. When divorce is on the horizon, a deceptive spouse can hide assets from a partner who is inattentive or ill informed on financial matters.

“Pleading poverty” can be used to hide wealth. To a clueless spouse, talk of failed investments and business reversals creates the impression that a partner may have less wealth than he or she really does. This includes exaggerating or overstating debts.

Unusual and expensive purchases can be used to hide wealth, for example, expensive art or antiques, whose value is easy to overlook or underestimate in a divorce settlement.  These purchases are sold after the divorce.

Each of these three may be joined with maneuvers that include creating bank accounts with a minor’s money, using traveler’s checks to store money, and paying more taxes than necessary to get a refund later.

A spouse who suspects that assets have been hidden should talk to his or her lawyer.

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