Where’s the Money? Hiding Assets During Divorce

As you might expect, or have experienced first-hand, getting divorced here in Kentucky can be messy, ugly, duplicitous and even outright hostile. It should come as no surprise then, that some spouses attempt to hide assets either in anticipation of divorce or during the divorce proceeding.

Kentucky is not a Community Property state where everything is split equally. Instead, here in the Commonwealth, property is divided by what’s known as Equitable Distribution. Essentially, if the economic strength of one spouse is greater than the other, the spouse with less income, and less earnings potential, is likely to receive a greater proportion of the marital property. This is why, as part of the divorce process here in Kentucky, each spouse is required to completely disclose their assets, debts, income, and expenses. The court must have a full understanding of the financial health of each spouse to determine if spousal maintenance is justified and to make sure that the division of assets is fair and equitable. This is where the funny business begins. One spouse, or even both, might not think the equitable division of assets is fair at all. Hence, they may be reluctant to reveal certain assets, or may actively try to hide assets.

Could your spouse be hiding assets?

How would you know? Hiding assets during a divorce is sneaky, unethical and illegal—but it happens much more frequently than you might expect. For high net-worth couples there can be a litany of property to sweep under the rug. Such assets can include out of state rental and/or vacation properties, off shore bank and brokerage accounts, retirement and pension plans, stock options, restricted stock, deferred compensation, life insurance, foreign business or joint-venture investments.

How a spouses go about hiding assets can be creative and difficult to detect.

Some of the more popular tactics, during the divorce proceeding include, but are not limited to, the following:

1. The Stash. Hard currency or smaller high-value property can be hidden away in a safe deposit box somewhere in the house or elsewhere.
2. The Uncle Sam Scam. A spouse may underreport income on his/her tax returns or financial statements. Perhaps they’ll make overpayments to the IRS or creditors. If your spouse overpays, now, he/she can get the refund later after the divorce is final.
3. The Income Putt-Off. A spouse may intentionally defer salary, delay signing new contracts or refrain from taking earned commissions or bonuses. This sneaky trick means this income won’t be “on the books” during the divorce proceeding.
4. The Fake Family Loan. Creating phony debts is one way to diminish disposable income. Your spouse may collude with family members or friends to establish phony loans or expenses. They’ll simply make payments to the family members or friends, knowing that they’ll get all the money back after the divorce is final.
5. The Kiddy Account. Your spouse may try to set up a custodial account in the name of a child, using that child’s social security number. They could also use a trusted friend’s social security number, in which case, it might be very difficult to locate the account.
6. The Investment Dump. Your spouse might transfer stock (investment accounts) into the name of family members, business partners or “dummy” companies. After the divorce is final, the assets can be transferred back.
7. The Off Shore Score. While the US might have specific regulations about information a bank must disclose during a divorce, an offshore banker could potentially disregard these laws. If the off-shore banker is uncooperative, the hidden amount of money would be very hard to detect.
8. The Padded Purchase. Your spouse may buy items that could easily be overlooked or undervalued. Maybe no one will notice that expensive antique carpet that’s now at his/her office? You might be wondering why your spouse recently made several significant additions to his/her coin, stamp, or art collection.

What should you do? Is there any way to detect or determine whether or not your spouse is being a slime-bag?

During the divorce process, if you have suspicions, you and your attorney may want to use the services of a forensic accountant. Once your forensic accountant does an analysis of you and your spouse’s marital living expenses and then connects those expenses to all known sources of income, assets and debt, it is fairly easy to see if there’s a mismatch. A prodigious discrepancy often points to the concealment of income and/or assets. Finding the hidden income and/or assets requires further investigation, depositions and requests for production.

Timing, however, is crucial. If assets or income are being hidden, disguised or disposed of during the divorce or recently prior to, they’re much easier to find. Unfortunately, if your spouse has been engaged in this kind of sneaky activity for many years prior to your divorce, finding everything is nearly impossible.

Don’t get any bright ideas. Intentionally failing to completely disclose all income and/or assets, here in Kentucky, is no small thing. A judge may issue sanctions and require the spouse who is found to have hidden assets to pay the other’s legal fees. The judge can even grant higher spousal maintenance payments. In some cases, a person found to have engaged in such duplicity may even face criminal charges for fraud.

Contact an Experienced Kentucky Divorce Attorney Today

Allow Richard David Lom to structure a comprehensive divorce strategy that serves to protect your financial interests.