What happens when there are undisclosed or hidden assets in divorce?

what happens if my spouse hides assets during divorce

In a divorce, there is a legal requirement that each spouse must disclose all assets, income, and debt as part of the financial disclosure process.  This is a critical part of divorce, since complete financial disclosure is required in order to equitably divide assets and determine alimony and child support.

Most of the time, both spouses comply.

But there are other times when a spouse will inadvertently or deliberately be less than completely forthcoming.

Financial affidavits are legal documents, and when they are signed by a spouse, that person is swearing under penalty of perjury that they are telling the truth about the current state of their finances.

When a spouse does not disclose all the facts about the value of the assets they have, there is a violation of fiduciary duties that are a part of the divorce process because the duty of disclosure has not been adequately met.

There is an affirmative duty to disclose the information without any request from a spouse, whether it is formal or informal.

Still, it’s not uncommon for a spouse to hide assets or misrepresent the values of marital property.  Spouses may also understate their income or claim inflated expenses.

If you’re concerned that your spouse may be hiding assets, be sure to let your attorney and Certified Divorce Financial Analyst (CDFA) know. They can help you spot inconsistencies and prepare discovery (request for production of documents, interrogatories, depositions) in order to uncover any attempts to hide assets during a divorce.

If needed, you can also bring in a forensic accountant to do detailed analysis to look for hidden assets that may be otherwise hard to uncover.  This makes the risk of getting caught fairly high and that could result in some unwanted consequences.

While it may be tempting for a spouse to try and hide assets, especially in an acrimonious divorce proceeding, the risks are not worth it.  The act is both immoral and illegal.

Spouses may try to hide assets for a number of reasons

In a community property state, assets are split evenly.  But in an equitable distribution state, assets are split equitably according to many factors, which does not always mean 50/50.

A judge has discretion to award one spouse more than the other based on each spouse’s earning potential, how long a couple were married, and how much alimony or child support may be awarded.

Keep in mind that income is one of the main determining factors in deciding how much alimony or child support should be paid.  This may be an incentive for a spouse required to pay to downplay or hide earnings as a way of reducing the amounts they will have to pay.

Some spouses may also try to hide assets simply to deprive their spouse from having the full benefit of the asset’s value that they can use or enjoy.  Vindictive behavior can lead to some poor choices when it comes to assets, so it’s easy to imagine that a spouse will act irrationally simply out of spite at times.

There are a number of ways that a spouse may try to conceal assets.  The easiest and most direct way to do this is to give cash or an asset to a friend for safe keeping out of sight while a divorce is pending.

Other ways to conceal assets include using a secret safety deposit box to selling assets at a much lower value than they are actually worth.  Business owners have been known to falsify transactions, classify personal expenses as business expenses, use shell corporations or make significant adjustments to their salary during a divorce period.

These attempts may have a higher chance of succeeding if your spouse wasn’t involved in household finances and doesn’t have an attorney.  But 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.

What are the consequences of hiding assets?

When someone lies under oath in a divorce, they can face a range of penalties.  These penalties will vary from state to state and from case to case, but judges take a dim view when a spouse is not honest about their financial affairs.

If a spouse intentionally violates disclosure laws, a judge could order the spouse to pay attorney’s fees and could possibly impose a fine as well.

Judges may even have the power to award the entire amount of the undisclosed asset to the victim spouse as a penalty.  In some other cases, if the lack of disclosure is especially egregious, a judge may actually incarcerate a spouse for lying.

Even if a judge takes no formal action, there could be other ramifications.  The most significant of these is that if you lie on a disclosure, your credibility will be ruined in the eyes of the judge.

You will end up playing defense for the remainder of your case.  It will be easy for your spouse to cast themselves as the victim as part of a strategy to gain other concessions from you during the trial.

What happens if you realize that you failed to disclose an asset?

While you should make every attempt to be honest at the outset, there are times when you may have inadvertently forgotten to disclose an asset.  When this happens, you need to disclose it right away by modifying your disclosure affidavit.

Sometimes an omission happens out of neglect when one party simply does not do a good job of detailing all of their financial issues.  This is especially common in divorce cases where parties represent themselves in court without an attorney.

If your divorce is finalized and you believe after the fact that not all of the financial aspects of the divorce were accurately portrayed during the case, it may be possible to reopen the case.  This can be a complicated process though, partially due to a possible statute of limitations that may be a part of the state law where you live.

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