Hidden Assets in Divorce: 5 Ways You Can Uncover the Truth

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Divorce is rarely easy. In the case of high-asset, high-conflict divorces, the difficulty can rise exponentially. When hundreds of thousands or even millions of dollars are at stake, people can sometimes resort to unethical tactics. Hidden assets in divorce proceedings are not uncommon. One spouse may willfully hide what they have at their disposal to sway the court to a more favorable opinion.

Most attorneys will be looking for hidden assets, and more often than not, highly skilled specialists in family law will find these hidden assets and expose them to you to ensure you get a fair and just settlement.

If you suspect your ex might be hiding assets in the divorce process, here’s what you need to know, including five surefire ways to uncover the truth.

What Are Hidden Assets in Divorce?

Hidden assets are any financial resources or valuables deliberately concealed from a spouse during divorce proceedings. The goal is to diminish the size of the marital estate, limiting the amount available for fair division between both parties. Spouses can hide these assets in various ways, from secret bank accounts to investments not readily apparent on financial records.

For example, imagine a couple going through a divorce. Let’s say one spouse, the husband, has been secretly depositing a portion of his paycheck into a separate bank account for years without his wife’s knowledge. This hidden bank account and its balance would be considered a hidden asset.

If the husband fails to disclose this bank account on their financial disclosure documents, an experienced attorney would have to dig into the records, potentially obtain subpoenas, and depose people to obtain this vital information.

Hidden assets are a substantial problem in a divorce as they completely skew the outcome in one party’s favor. Under-reporting assets may lead to the person engaging in unethical behavior receiving a bigger slice of the marital pie.

Do All Hidden Assets Count?

At first glance, it seems obvious – all hidden assets count in a divorce, especially since California is a community property state. It matters if you acquired it during the marriage, as you must do what you can to uncover it. However, there’s an important caveat: separate property. If you acquired the asset before the marriage, received it as an inheritance, or explicitly designated it as separate property in a legal agreement (like a prenup), it may not be subject to division even if the opposing party took deliberate steps to conceal it. The logic, of course, is that it was never part of the divorce settlement anyway!

While hiding any asset is a breach of fiduciary duty and can have consequences, you and your attorney need to assess the assets discovered strategically. Uncovering a secret savings account from before the marriage, for instance, might be frustrating, but it won’t necessarily shift the financial outcomes of your divorce. It’s about determining which hidden assets impact the equitable division of marital property. Most of them will affect the result of the divorce, but there are some unique exceptions.

What Are the Five Ways Someone Can Uncover the Truth of These Assets?

Fortunately, all people going through a divorce in California have some tools at their disposal to uncover the truth about these assets.

1. Review Financial Records to Find a Paper Trail

A meticulous review of financial records often illuminates hidden assets that might remain undiscovered. You can start piecing together the puzzle by examining bank statements, tax returns, and old credit card bills. Look for inconsistencies, unexplained discrepancies, or unusual transactions. Did a large sum of money vanish from a joint account without explanation? Are there expenses that do not match your ex’s lifestyle? Following this paper trail could lead you in the right direction.

For example, you notice recurring payments on a credit card statement to a storage facility you never had when you were a couple. Further investigation could reveal that your spouse has been renting a unit to store expensive artwork or a collection of valuable items, effectively hiding them from the marital asset inventory.

An experienced divorce attorney and a forensic accountant can help you find these paper trails, which should lead you directly to the hidden assets.

2. Analyze Business Books and Interests

If your spouse owns a company, that might be the first place to start when locating these hidden assets. Many spouses will use their corporations to funnel money. Sudden drops in reported profits, unaccounted-for expenses, or unusual “write-offs” can be red flags for hidden assets. Pay close attention to any recent bonuses, raises, or distributions to your spouse – these could be ways to transfer marital assets into their control.

Sometimes, hidden assets take a less obvious form. Consider whether there’s been a sudden decrease in business inventory or equipment value. Have valuable assets been sold off without a clear business justification? These actions could indicate an attempt to hide the actual value of the business and reduce the amount you’re entitled to in the divorce proceedings.

Again, this is an area where your divorce attorney, working with a forensic accountant (potentially), can help you unravel the mystery and uncover the hidden assets in divorce.

3. Conduct Thorough Discovery

As part of the discovery process in your divorce, both parties must be transparent and upfront about their financial situation. California law provides powerful tools for gathering information during a divorce, and these legal mechanisms are invaluable when you suspect hidden assets. Your attorney will ultimately guide you through the formal discovery process, which includes tactics like depositions, interrogatories, and subpoenas. Depositions involve taking sworn testimony from your spouse or other relevant individuals, forcing them to answer questions under oath, and creating a record you can use to spot inconsistencies. Interrogatories are written questions that people must answer in writing and under oath.

Subpoenas are even more powerful. These court orders can compel third parties, like banks, financial institutions, or employers, to produce documents directly. Taking this action allows you to bypass your spouse and obtain records that might expose hidden accounts, investments, or unusual money transfers.

The discovery phase of the divorce process is sometimes the most important. After all, it sets the tone for the entire process – get the discovery done right, and you’re negotiating honestly. If the discovery fails to uncover hidden assets in divorce, all subsequent negotiations will not be fair due to insufficient information.

4. Find Fake Debt and Fake Liabilities

Unearthing hidden assets isn’t just about finding things your spouse has concealed. It’s also about identifying attempts to make the marital estate appear smaller than it is. One tactic some use is creating fake debt or liabilities. This tactic can be fabricated loans from friends or family, inflated business expenses, or even fictitious legal fees. The goal is to make it seem like there’s less marital wealth, leaving you with a smaller share.

Scrutinize any significant debts your spouse claims exist. Can they provide clear documentation for these liabilities? Do the terms of the loans seem reasonable? Investigate the supposed creditors. Are they legitimate entities, or could they be friends or associates simply playing a role? By dissecting these debt claims, you may uncover a strategy to hide assets and ensure you receive a more equitable share of the marital estate.

5. Value Assets Using Your Own Experts

One of the most common ways to “hide” assets is to undervalue them. These valuation issues are sometimes the most difficult to spot since the asset is not physically hidden. However, the intentionally lowered valuation “hides” a portion of it.

Don’t simply accept your spouse’s word (or their experts’) on the value of assets, especially if you suspect they’re trying to hide the true worth of something. Hiring your experts in various fields is crucial to uncover any undervaluation of assets. Whether it’s a real estate appraiser, a business valuation expert, or a specialist in valuing antiques or collectibles, these professionals provide objective evaluations that can challenge any suspicious figures your spouse presents.

By getting your expert valuations, you protect your interests and gain a clearer picture of the marital estate. Your independent assessment can expose this tactic if your spouse has deliberately undervalued property or business to downplay its significance. This assessment ensures you receive a fair and equitable share of your marital assets during the divorce settlement.

Hidden Assets in Divorce: Don’t Feel Blindsided

Don’t feel blindsided if you think your soon-to-be-ex spouse might be hiding assets in divorce. It is, sadly, an all too common problem. Conduct thorough discovery, review personal and business financial documents, have your valuations, and look closely for creative ways to hide assets, like reducing their valuations through fake debt.

Contact us today if you suspect your spouse has hidden assets in divorce. Our number is (408) 560-4487, or you can complete our secure online form to schedule a case evaluation with one of our skilled high-asset divorce attorneys. Don’t delay. The longer you wait to locate these assets, the harder it is to find them.

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