Divorce and Hidden Assets (Part I)

hidden assets

One rather vexing problem in many divorces, particularly high asset divorces, involves hidden assets – assets that consist at least in part of marital property that one spouse has taken or converted and seeks to keep from the other spouse.

In any divorce, all income and all property acquired during the marriage are classified as marital property, and by default are viewed as jointly held assets of the spouses. Typically, unless circumstances dictate otherwise, a court will divide the marital assets equally. So one spouse, to avoid having some of the marital assets go to the other spouse, may try to “hide” certain assets to force an unequal division of property.

Hiding assets is both far too common and fraudulent. A spouse has a duty to disclose all marital assets as part of the divorce proceeding. Submitting a knowingly misleading schedule of property under oath is tantamount to perjury and also fraud, and could be the basis of criminal charges. However, rather than become a criminal matter, most courts use civil remedies to deal with secreted assets, from contempt to an equitable action of dividing undivided marital property, often in a disproportionate way that punishes the spouse who hid the asset.

What types of assets are more likely to become hidden assets? Generally, the harder to discover the source of an asset, the more likely it will become hidden. So, cash becomes the main currency of hidden assets, from shaving part of a paycheck to pawning a family heirloom.

Other cash-related assets commonly hidden include bonds, mutual funds, annuities, stocks, travelers checks and savings bonds.

Cash can be hidden practically anywhere and is very hard to trace. As such, any asset that can easily be converted to cash in a cash transaction would be a likely candidate for a hidden asset – jewelry, antiques, collectibles and other personal property, as well as guns, art and hobby-related equipment.

How do people go about hiding assets? That will be the subject of our next post.

If you have questions about hidden assets and divorce, contact us – we can help.

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