Divorce is a messy, painful, complex, contentious process that does not always bring out the best in people.
In a community property state such as California, all assets accumulated between the date of marriage and the date of separation are divided equally in a divorce. Despite a few exceptions for certain types of gifts, inheritances, assets legally categorized as separate property, and assets covered in a prenuptial agreement—anything acquired during your time as a married couple belongs 50/50 to the partners, no matter who earned it and how, who made more money, or why the marriage fell apart. From the court’s standpoint, marriage is a business arrangement, and these are the terms.
These parameters can be especially tough to swallow when spouses feel hurt and bitter and feel like they deserve more or their ex deserves less for various reasons, and when things feel unfair. And unfortunately, that can cause people to make poor, risky, dishonest, and even vindictive decisions in the property division process—such as attempting to hide assets.
During divorce proceedings, spouses are legally required to fully disclose all assets and obligations, whether they believe it falls under separate or community property. This includes property, income streams, investments, tax returns, gifts, and inheritances, account statements (bank, credit card, brokerage, retirement, etc.), insurance policies, loan applications, debts, etc. There are heavy consequences for concealing assets—the judge can award the asset in part or in full to your ex, order you to pay their attorney and court fees, impose additional financial sanctions, and in extreme cases, order jail time.
Both spouses must be thorough and transparent in disclosure during a divorce.
Although it can be challenging to identify and prove, if you suspect your spouse of attempting to hide assets or financial information, there are some telltale signs to watch for:
Secrecy. You have the right to understand what’s happening with your finances. Although it’s common for one person to be the higher earner or to manage the bulk of household money, spouses have a fiduciary duty to each other. From the time they marry until assets are legally divided in a divorce decree, spouses are responsible for protecting and preserving their marital assets, having equal access to their financial information, and not taking unfair advantage of the other partner. A spouse who becomes unusually controlling or guarded about financial matters may be deceitful. If your spouse refuses to discuss specific financial issues; if they’re vague or evasive when you ask straightforward questions about money or assets; if you find yourself denied access to online accounts; if paper statements suddenly stop arriving at the family home—these are red flags.
Mysterious transactions. Watch for unexpected withdrawals from accounts. Inexplicable changes in your bank balance, a slow drain of funds you can’t account for, or cash withdrawals from credit cards or ATMs may be warning signs. Review account statements thoroughly.
Your spouse’s earnings drop. There are many reasons why a person’s income can fluctuate, especially if they’re self-employed or work on commission. However, during a divorce process, when one partner suddenly seems to be earning less than usual, it can be a sign that they’re hiding income by underreporting, or perhaps actually deferring payments, raises, or expected bonuses until finalizing the divorce.
A change in spending habits. Significant changes in the way your spouse spends money should trigger suspicion. Buying luxury items or making other unusual purchases can be a sign they maintain a secret account or have an undisclosed income stream. Social media posts sometimes reveal your ex living the “high life”.
Sudden “generosity.” Has your spouse started making substantial “loans” to friends or family? Are they giving expensive gifts? Have they transferred investments to someone else or repaid “debts” you didn’t know existed? These may be tactics to divert funds or assets by phony methods until they intend to get them back after the divorce is final.
Opening accounts in your children’s names. A sneaky parent can use a child’s social security number to set up a secret account in the child’s name and funnel funds into it.
Hiding actual belongings. Spouses sometimes use safe deposit boxes or storage units to physically conceal high-value items like art, jewelry, collectibles, or cash. Certain items must be disclosed even if they are categorized as separate property.
Reporting fake expenses. Business owners, for example, sometimes try to undervalue their enterprise by creating fake debts, making it look like they owe more than they do.
Revealing tax returns. Financial planner, Marissa Reale, says tax returns are the “number one place to start” when trying to uncover evidence of hidden assets. Your return may indicate mortgage interest on property you didn’t know you owned, gambling winnings or losses, dividends and interest on investments you were unaware of, business assets or depreciation, and capital gains.
Discuss any suspicion of hidden assets with your lawyer as early as possible in the divorce process; bring as much documentation and evidence as you can gather. Although it is possible to file a motion with the court to recover hidden assets after your divorce is finalized, it is less complicated during the dissolution process. In either case, the process can be challenging, and your attorney may recommend you hire additional experts, such as a forensic accountant, to conduct a thorough investigation.
The trusted San Francisco family law attorneys at SFLG are experienced in managing the many complex financial matters related to divorce. We can help you deal with a dishonest ex and obtain a fair settlement.
by Debra Schoenberg