Searching for Hidden Assets at Divorce

Posted by Steven D. Eversole | Mar 03, 2006 | 0 Comments

This list includes common ways in which a spouse may undervalue or disguise marital assets:

  • Antiques, artwork, hobby equipment, gun collections, and tools that are overlooked or undervalued. Look for antique furnishings, original paintings, or collector-level carpets at the office.
  • Income that is unreported on tax returns and financial statements.
  • Cash kept in the form of travelers' checks. You may be able to find these by tracing bank account deposits and withdrawals.
  • A custodial account set up in the name of a child, using the child's Social Security number.
  • Investment in certificate “bearer” municipal bonds or Series EE Savings Bonds. These do not appear on account statements because they are not registered with the IRS. (The government is phasing out these bonds, realizing that it is losing a lot of money.)
  • Collusion with an employer to delay bonuses, stock options, or raises until a time when the asset would be considered separate property.
  • Debt repayment to a friend for a phony debt.
  • Expenses paid for a girlfriend or boyfriend, such as gifts, travel, rent, or tuition for college or classes.
  • Retirement accounts that your spouse never tells you about.

In addition, business owners may try to hide assets in these ways:

  • Skimming cash from the business.
  • Salary payments to a nonexistent employee, with checks that will be voided after the divorce.
  • Money paid from the business to someone close — such as a father, mother, girlfriend, or boyfriend — for services that were never actually rendered (asuming the money is given back to your spouse after the divorce is final).
  • A delay in signing long-term business contracts until after the divorce. Although this may seem like smart planning, if the intent is to lower the value of the business, it is considered hiding assets.

When you're looking for these items, you may have difficulty finding them or getting the proof you need to show they exist. Formal discovery procedures through litigation may help. For instance, you could take the deposition (legal interview) of your spouse's boss or payroll supervisor. But you may also need to hire a forensic accountant or a private investigator. (A forensic accountant is an accountant who is trained to look into accounting practices in order to gather evidence that can be used in court.) Usually an attorney can refer you to these specialists.

Document Your Finances Before Filing for Divorce

If you suspect that your spouse may attempt to hide assets, it's best to start investigating your household and business finances before initiating divorce proceedings. Make copies of important documents such as tax returns from the past several years, bank account statements, pay stubs, and any other documents that reflect joint assets or debts. Keep copies of these documents outside the home if you're still living with your spouse or partner.

Copyright © 2006 Nolo

About the Author

Steven D. Eversole

J.D., Samford University's Cumberland School of Law, Birmingham, Alabama B.A., University of Alabama, Tuscaloosa, Alabama

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