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Family Law Newsletter

Hidden Assets and Divorce

Decisions regarding the division of marital assets upon divorce may be made either by the divorcing spouses themselves or by a judge. State law governs how marital and separate property is divided in the property distribution. Typically, each spouse will receive a percentage of the total value of their joint property. Although it is illegal to do so, one spouse may try to hide their assets in an effort to protect the assets from property division. There are numerous tactics that an individual might try to use to veil their assets. However, it is possible to find hidden assets to make them available for a fair distribution in a divorce.

Two Schemes to Divide Property

Appropriate division of property between divorcing spouses varies by state. Generally, a court will divide assets under one of two schemes, depending on the jurisdiction. In an “equitable distribution” or “separate property” state, any assets and earnings that were accumulated during the marriage are distributed equitably, or fairly. That does not mean that the assets are divided equally. In fact, as applied, two-thirds of the property is typically awarded to the spouse with the higher income, with the remaining one-third going to the other spouse.

In contrast, in one of the nine “community property” states (AZ, CA, ID, LA, NV, NM, TX, WA, WI; AK is opt-in), property is first characterized as community or separate property before it is divided. Generally, community property is any property that was acquired during the marriage, and it is owned equally by both spouses. Community property is divided fifty-fifty regardless of which spouse acquired it or earns a higher income. Separate property is typically all property acquired by only one spouse before marriage, or through a gift, inheritance or a personal injury award. As such, separate property is awarded entirely to the spouse to whom it belongs.

Preventing Hidden Asset Harm

Hiding assets to shield them from equitable or equal division upon divorce is both financially harmful to the innocent spouse as well as illegal. One way spouses may protect themselves is by being aware of all financial information before the divorce proceedings begin by making copies of financial documents such as tax returns, bank statements, and pay stubs. Another way to protect assets is to set up individual accounts that can only be accessed by the person named on that account.

Common Ways to Undervalue or Disguise Marital Assets

There are numerous ways in which a spouse may attempt to hide some assets to prevent their inclusion in the divorce property distribution. Tactics used to hide assets of a business include:


  • Money from the business is paid to a family member or close friend for phony services, then returned to the spouse after the divorce

  • Salary checks are written to non-existent employees

  • Collusion with the spouse’s employer to delay business contracts, raises, or bonuses until after the divorce

  • Skimming cash from a business owned by one spouse

  • Cash converted into traveler’s checks

  • Payment of a non-existent debt to a family member or friend that will be repaid to the spouse after the divorce

  • Unreported income on tax returns and financial statements

  • Investing in certificate “bearer” bonds and/or Series EE Savings Bonds

  • Artwork, antiques or other property whose value is undervalued or overlooked

  • Rent, college tuition or gifts given to a girlfriend/boyfriend

  • An account set up under a child’s Social Security number

  • Retirement account that the other spouse never knew about


Locating Hidden Assets

Hidden assets are sometimes difficult to locate, and their existence may be difficult to prove. Typically, formal discovery procedures in divorce litigation can assist in finding assets that have been hidden by one spouse. For example, the court can order certain financial records to be disclosed, which may reveal the hidden assets. Further, forensic accountants may aid in locating hidden assets since they are trained to assess the value of investments or businesses, interpret and evaluate various financial records, and can testify on their findings in court. Finally, a private investigator might be necessary to help discover such assets.

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