Financial issues involved in a divorce - especially high net worth cases - are often complicated and require professionals with the experience and knowledge to handle such cases. Hiding assets can be a form of "self-help" that unfairly skews the divorce results.
It is not uncommon for a spouse to hide (or attempt to hide) assets, especially if the divorce has been planned for quite a while. In one case I previously litigated the husband tried to hide more than $50 million by transferring assets to trusts he established years before the divorce began. Even if the amount of the assets in most cases is substantially lower, hidden asset cases can end in unfair results if they are not properly handled. A few of the most common ways of hiding assets are as follows:
1. Under Reporting Income
Perhaps the most common method of hiding assets is by under reporting income. Generally this method is used by people who own a business. It is not at all uncommon, almost to the point where it is to be expected, that if a spouse has a business that receives cash (such a as bar) that person very likely will hide income. Another method of under reporting income by business owners is by failing to collect and accounts receivable. In this approach, a business owner puts off collecting money owed to him by his/her customers until after the divorce. In cases where the amount of the income is substantial, the party not running the business must demand all relevant business records and quite likely hire a forensic accountant familiar with the specific type of business in order to make an evaluation of whether all income is being properly reported.
2. Phony Debts to Friends or Family
A less sophisticated, but also common method of trying to hide income is for one spouse to execute a promissory note to a family member to create a false debt. If successful, that spouse will then receive more property in order to compensate for the false debt to the family. In these instances you must conduct thorough discovery to make sure actual money was received for the promissory note and that it was a true debt and not a disguised gift.
3. Transferring Money to Friends or Family
Another method to hide assets similar to creating phony debt is transferring assets to friends or family members. This not a very sophisticated method of hiding assets because it is usually traceable by a review of financial account statements, but it does require that you and your attorney demand, receive and carefully review your spouse's financial records.
4. Rolling Over Large Tax Refunds
It is not uncommon in divorce cases for one spouse to be more knowledgeable about finances than the other. Another common method of hiding assets is by rolling over a large tax refund to apply to the subsequent tax year. That way the spouse never receives the check, does not divide the tax refund with her/his spouse and then receives the increased refund the following year. I have been involved in cases where one spouse tried to hide more than $200,000 using this approach. This is another reason to demand and competently review all relevant financial records in a divorce.
A newer and developing method of hiding assets is through the use of bitcoins. Bitcoin purchases may or may not involve a level of anonymity depending upon the method of purchase. Most divorce lawyers still do not know much about bitcoins but or the methods of tracking bitcoin purchases so if you have a tech savvy spouse who may use bitcoins to hide assets, it is important to hire a lawyer who can use available resources to track the purchases.
These are a few of the methods by which parties to divorce cases can hide assets. If you are in a divorce case or considering divorce and your spouse has assets that may be hidden it is important to hire a lawyer who has experience and the knowledge to use the tools available to her/him to find these assets to protect your financial future. I was recently involved in a divorce case where I used an unconventional tool (unknown to the vast majority of divorce lawyers) to find a hidden asset worth more than $100,000. The cost of that process was less than $1000, so my client obviously benefitted from my knowledge and experience in this area.
If you would like more information about how hidden assets (or any other issue) might affect your potential Chicago area divorce please feel free to contact me by email or phone at (312) 884-1529.