Divorce can carry with it a lot of issues that range from financial to emotional. Whether it’s deciding what property goes with which spouse, or dividing up business assets, there can be many considerations that make a divorce a stressful and complex process. There are times, however, when a spouse makes things harder than they have to be by refusing to cooperate with the court. One way a spouse can refuse to cooperate is by misrepresenting what assets are available or in existence at the time of divorce. Such assets are known as “hidden assets,” and can not only skew the divorce judgment, but it can also create more problems after the judgment has been issued.
When you hear the term “hidden assets,” thoughts of suitcases full of money or Swiss bank accounts may come to mind. In reality, there is a wide spectrum of things that can be considered hidden assets. Hidden assets are any financial matter or issue that is misrepresented, or not disclosed, to the other spouse. Examples of hidden assets include:
- Hiding, understating, or undervaluing marital or personal property
- Overstating debts
- Reporting lower income
- Reporting higher expenses
Furthermore, assets can fall in one of two categories. Tangible assets are those assets that have a physical form and can be sold or liquidated. Examples of tangible assets include real estate, vehicles, antiques, collections, hobby equipment, and even pets or other animals, to name a few. Intangible assets, on the other hand, do not have a physical form, but still hold value. Examples of intangible assets include bank accounts, retirement accounts, stocks, investment income, royalties, and intellectual property.
Needless to say, it is vital that the court gets an accurate idea of the financial situations of each party in order to make a fair and just judgment. When parties to a divorce provide income statements and valuations for properties and businesses, they are asserting to the court that all information contained in the statement is correct and accurate. Any misrepresentation or concealment of assets can create an imbalance in the court’s decision, and can cause problems for one or both parties long after the judgment is made. An obvious divorce determination affected by hidden assets is that of property division.
Hidden assets affect more than just marital property, though. This is because the court considers the financial situations, including personal property, of both parties when dividing up marital property. As a result, hidden personal property could tip the scales in favor of the party hiding assets. In addition to this, there are also the issues of spousal and child supports, which both use the net income of the parents to determine how much money a party should receive as support.
Finally, there is the child custody determination, in which known assets, the character of the parents, and other factors, help determine what is in the best interests of the child. If it is discovered that a party wilfully concealed or misrepresented assets to the court in a divorce proceeding, then that discovery could have a large impact on the court’s custody determination. (Child custody in Florida)
What you can do
A big question you might have is: how can a person know if there are any hidden assets if they are intentionally hidden? A person hiding assets will not simply leave out a list of items that have been misrepresented for the world to find. Fortunately, there are several ways to determine the existence of hidden assets. Such methods include examining tax forms and bank records for discrepancies.
The process of discovering hidden assets becomes even easier through a divorce, due to the discovery process. Throughout the trial, a spouse can use interrogatories, testimonies or depositions in order to find any discrepancies between what the other spouse has reported to the court and what is in existence. For example, if the spouse reports earning a moderate amount of money, in a financial affidavit, but continues to purchase expensive items, such as clothes or a vehicle, then there is a good chance that they are concealing assets from the court. Other things to look for in financial affidavits from the divorce include:
- Discrepancies between the reported income and actual payroll
- Falsified expenses
- Undervalued assets
- Credit card debts without supporting documentation
- Regular deficits that do not result in increasing debts
In addition, there is also the possibility that your friends or family may know of certain assets that were not revealed during the marriage.
Another method to discover hidden assets is to make use of experts who have experience in discovering hidden assets. While an experienced attorney may be skilled in finding hidden assets based on documents obtained in discovery, there are times when it might be necessary to use additional outside help. It’s not uncommon for attorneys to work with forensic accountants, business valuation experts, and tax professionals in order to make sure that the court gets a full picture of each party’s assets.
Once these hidden assets are discovered, the next step would then be to provide the court with evidence of the assets, so that the financial statements of the spouse can be adjusted accordingly. Once the court learns of this, there are several things that it can do in order to make everything fair. For example, a court could choose to retroactively increase support payments, and hold the paying spouse responsible for any resulting back payments. In addition, the court could even chose to give part or all of the assets to the injured party.